Did closures do any good? Labour productivity, mine dynamics, and rationalization in interwar Ruhr coal mining

Throughout the late 1920s, German coal mining saw an exceptional surge in labour productivity, led by the performance of the Ruhr coal mines. It is commonly accepted in the relevant literature that the economy-wide ‘rationalization boom’ explains that pattern. This study tests the related hypothesis that ‘negative rationalization’, in the form of a massive wave of mine closures over the period 1924-9, played a significant role in stimulating aggregate labour productivity in the Ruhr coal district. Using an original dataset for the totality of Ruhr coal mines, the causes of productivity change over the broader period 1913-38 are identified, using the decomposition method of Foster, Haltiwanger, and Krizan. Results suggest that labour productivity was driven largely by improvements at individual mines, attributable to the intensified mechanization of underground operations. In sharp contrast, turnover effects were marginal, overall, compared to the effects stemming from the producer dynamics among surviving mines. Thus, the practical productivity implications of mine closures during the rationalization boom are negligible and overrated in the literature. These findings indicate the necessity of testing the relative importance of ‘negative rationalization’ in the form of plant closures in other branches of the Weimar economy.