PRODUCTIVITY AND METAL MINING - EVIDENCE FROM COPPER-MINING FIRMS

One of the aims of productivity measurement is to assess the performance of various sectors of the economy with respect to their use of scarce inputs. In this paper the emphasis is on the effects of firm behaviour on simple index number measurement of total factor productivity in non-renewable resource industries. Economic theory predicts that when the stock of ore is known and there is a positive discount rate, an intertemporally profit-maximizing firm will often process the 'best' ore first. That is, ores that are of high grade and/or are most easily accessible will be the first to be processed. By their very nature, these 'best' units will correspond to the lowest-cost units of final metal output. Less capital, labour, energy and materials will be needed in the mining and milling processes. Even under assumptions of efficient production and of no technological change, traditional measures of total factor productivity will tend to decrease over time. In order to examine this problem firm-level and aggregate level total factor productivity indices are constructed for 14 copper-mining firms. The evidence indicates that, controlling for grade and ore accessibility, there appears to be no decline over time in true total factor productivity for these firms. © 1991, Taylor & Francis Group, LLC. All rights reserved.