Land Use, Supply, and Welfare Distortions Induced by Inefficient Freight Rates

Ann Carlos

Canadian Journal of Economics, 1988, vol. 21, issue 4, 835-45

Abstract: Although the contribution of railroad investment to Canadian econom ic development has been extensively analyzed, the consequences of the freight rate structure have not been examined. This paper is concerne d with how various pricing policies affect land-use patterns, agricultural supply, and welfare. It is shown that the Crow's Nest Agreement left freight rates 44 percent, and a (counterfactual) monopoly rate 70 percent, above marginal cost. The model and data imply reductions in supply and land use of 32 percent and 50 percent for these two pricing scenarios respectively. A new figure for aggregate Prairie land rent in 1901 is calculated also.

Date: 1988
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