Deregulation, rate incentives, and efficiency in the railroad market

Wesley Wilson and William Wilson

Research in Transportation Economics, 2001, vol. 6, issue 1, 1-24

Abstract: A number of important innovations and events over the last 25 years have reshaped railroad marketing and have led to dramatically lower rates. Many of these innovations have been developed for and used extensively in agricultural markets. In this paper, we document these innovations and examine the behavior of rail rates from 1972-1995, using a nonlinear regulatory adjustment mechanism to represent the effects of partial deregulation. We focus on rate changes that have occurred under the new regulatory regime introduced by passage of the Staggers Rail Act in 1980. Our econometric analysis applies to the five leading agricultural commodities shipped by rail which account for over 90% of agricultural movements. We find that rates for all five commodities have fallen dramatically over time, but that there are differences across the commodities in magnitude. We also find that the effect of partial deregulation on rates and productivity, while large, dissipates over time.

Date: 2001
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