Threatening to Increase Productivity

Arilton Teixeira (arilton8821@gmail.com), Benjamin Bridgman and Victor Gomes

No 19, Fucape Working Papers from Fucape Business School

Abstract: The wave of privatization in the 1980s and 1990s increased productivity of many previously state owned enterprises (SOEs). However, governments often do not have sufficient support to privatize SOEs. We provide evidence that threatening privatization and market competition (entry of new firms) can increase the productivity of SOEs, even though privatization and entry of new firms does not occur. We study productivity at Brazil's state-owned oil company Petrobras. After it lost its legal monopoly, Petrobras total factor productivity increased sharply. These large gains occurred despite the fact that Petrobras faced no immediate de facto competition. The threat of competition and privatization was sufficient to generate large productivity gains. These findings suggest that changing the competitive environment can be a powerful force for improving productivity at state-owned firms.

Pages: 39
Date: 2009-12
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Citations: View citations in EconPapers (1)

Published in Fucape Working Papers Dezembro 2009

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Working Paper: Threatening to increase productivity (2010)
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