Depletion, technology, and productivity growth in the metallic minerals industry

Abstract

Technological advancements dictate the productivity growth in all industries, including extractive ones. In the peculiar case of metallic mineral industries, this growth is also impacted by the natural variation in the metal content and chemical composition of the ore input, in the course of cumulative extraction and depletion of resources. Through a disaggregated treatment of productivity data achieved by using the input-output data on subprocesses of copper production and correlating them with input characteristics (ore grade), this study identifies and evaluates the impacts of the periodic changes in the natural input, as well as those of the technological progress, while reasonably controlling the influence of the other unrelated factors. This provides an objective assessment of the manner and extent of mitigation of the impact of the depletion-driven changes in the natural inputs of the said industry, through technological advancements. It reveals that the continuous and incremental developments in technology, successfully offset the detrimental effects of depletion on the copper sector productivity, often aided by the geological characteristics that changed to the miners’ advantage. However, the impact of depletion stands to outweigh the gains from innovative technologies, as soon as the ores breach a minimum threshold level of purity or chemistry. This study thus establishes the usefulness of productivity studies in estimating the impacts of depletion that may not proceed in strictly sequential and uni-directional manner. More importantly, it shows that the impacts are neither uniform nor linear and are not always detrimental to productivity growth. Though the study is primarily based on copper industry, the findings hold relevance for other metal industries too.