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Productivity in the Transportation Sector

In: Output Measurement in the Service Sectors

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  • Robert J. Gordon

Abstract

This is a comprehensive study of measurement and substantive issues that arise in determining the rate of multi factor productivity (MFP) growth in the transportation industry over the postwar period, 1948-87. Official data on output and employment are provided by two government agencies and conflict markedly for railroads, airlines, and trucking. This paper identifies the source of the conflicts and selects the best of the government indexes for further study, It concludes that improved data reduce the magnitude of the post-1973 productivity slowdown in transportation MFP growth from a previously reported 2.5 percent per annum to just 0.5 percent. The effect of deregulation has been mixed; MFP growth accelerated markedly for railroads when 1978-87 is compared to the pre-1978 period, but slowed sharply for airlines and trucking. New results on output quality are provided for airlines, particularly for the period of deregulation. Contrary to the standard view, deregulation has not substituted circuitous routings through hubs for nonstop flights available previously; instead the establishment of new hubs has greatly increased the number of nonstop routings available, and remarkably few nonstop routes have been discontinued. An estimate is provided of the value of time saved by the improved routings, and of the offsetting time cost of extended scheduled flight times resulting from increased congestion. Such estimates of the value of time are swamped by the huge contribution to welfare provided by the manufacturers of aircraft and engines; the time saving from the "invention of air travel" for 1989 is valued at 400 percent of domestic airline revenue and 3.5 percent of GNP. Alternative measures of capital input, based on new quality-adjusted equipment deflators, are provided for airlines, railroads, and trucking. These uniformly increase faster in the earlier postwar years than in the last decade and consequently imply a smaller decline in MFP growth than in o

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This chapter was published in:

  • Zvi Griliches, 1992. "Output Measurement in the Service Sectors," NBER Books, National Bureau of Economic Research, Inc, number gril92-1, July.
    This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 7240.

    Handle: RePEc:nbr:nberch:7240

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    1. Diewert, Erwin, 2007. "Index Numbers," Economics working papers diewert-07-01-03-08-17-23, Vancouver School of Economics, revised 31 Jan 2007.
    2. Edwin Mansfield, 1965. "Innovation and Technical Change in the Railroad Industry," NBER Chapters, in: Transportation Economics, pages 169-197 National Bureau of Economic Research, Inc.
    3. Sickles, Robin C., 1985. "A nonlinear multivariate error components analysis of technology and specific factor productivity growth with an application to the U.S. Airlines," Journal of Econometrics, Elsevier, vol. 27(1), pages 61-78, January.
    4. Daughety, Andrew F & Nelson, Forrest D, 1988. "An Econometric Analysis of Changes in the Cost and Production Structure of the Trucking Industry, 1953-1982," The Review of Economics and Statistics, MIT Press, vol. 70(1), pages 67-75, February.
    5. Ying, John S, 1990. "The Inefficiency of Regulating a Competitive Industry: Productivity Gains in Trucking Following Reform," The Review of Economics and Statistics, MIT Press, vol. 72(2), pages 191-201, May.
    6. Winston, Clifford, 1985. "Conceptual Development in the Economics of Transportation: An Interpretive Survey," Journal of Economic Literature, American Economic Association, vol. 23(1), pages 57-94, March.
    7. Severin Borenstein, 1989. "Hubs and High Fares: Dominance and Market Power in the U.S. Airline Industry," RAND Journal of Economics, The RAND Corporation, vol. 20(3), pages 344-365, Autumn.
    8. Berndt, Ernst R. & Fuss, Melvyn A., 1986. "Productivity measurement with adjustments for variations in capacity utilization and other forms of temporary equilibrium," Journal of Econometrics, Elsevier, vol. 33(1-2), pages 7-29.
    9. repec:fth:prinin:247 is not listed on IDEAS
    10. David Card, 1989. "Deregulation and Labor Earnings in the Airline Industry," Working Papers 627, Princeton University, Department of Economics, Industrial Relations Section..
    11. Diewert, W. E., 1976. "Exact and superlative index numbers," Journal of Econometrics, Elsevier, vol. 4(2), pages 115-145, May.
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    Cited by:
    1. Kajal Lahiri & Herman O. Stekler & Wenxiong Yao & Peg Young, 2003. "Monthly Output Index for the U.S. Transportation Sector," Discussion Papers 03-12, University at Albany, SUNY, Department of Economics.
    2. Kajal Lahiri & Wenxiong Yao, 2004. "A dynamic factor model of the coincident indicators for the US transportation sector," Applied Economics Letters, Taylor & Francis Journals, vol. 11(10), pages 595-600.

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