State enterprises, supply behaviour and market volatility: An empirical analysis of the world copper industry

Despite the popular view that state mineral enterprises are less flexible than private mining firms in adjusting output to changes in market conditions, almost all of the empirical studies undertaken to substantiate this contention have failed. Adopting an alternative empirical approach, this paper...

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Bibliographic Details
Published in:Resources policy 1993-03, Vol.19 (1), p.40-50
Main Author: Dobozi, Istvan
Format: Article
Language:English
Subjects:
Balance of payments
Copper industry
Economic aspects
Export-import trade
Government business enterprises
Market
Public enterprises
Supply
Supply and demand
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Summary:Despite the popular view that state mineral enterprises are less flexible than private mining firms in adjusting output to changes in market conditions, almost all of the empirical studies undertaken to substantiate this contention have failed. Adopting an alternative empirical approach, this paper finds that, in contrast to the results of earlier empirical efforts, state ownership fundamentally modifies supply behaviour. Not only are state copper firms less price responsive than their private counterparts, they actually appear to behave perversely at least at relatively low prices. It is also found that governments use the firms under their control as a macroeconomic tool to adjust balance of payments. The paper argues that the identified pattern of state enterprise behaviour accentuates market cycles and volatility in the copper industry.
ISSN:0301-4207
1873-7641
DOI:10.1016/0301-4207(93)90051-N