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Patterns of Restructuring: The U.S. Class 1 Railroads from 1984 to 2004

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Author Info
Friebel, Guido
McCullough, Gerard
Padilla Angulo, Laura
Abstract

After deregulation in 1980, competitive pressures forced the large U.S. freight railroads to restructure. Much attention has focused on defensive (cost-cutting) restructuring: until 2004 employment was reduced by 60%, and railroads abandoned many of their lines. Less attention has been given to strategic restructuring: many firms changed the skill structure of employment and their output mix. We investigate the effects of defensive and strategic restructuring on financial performance between 1984 and 2004. In a simple regression, line abandonments (reduction of network size) have positive effects on performance but employment reductions do not. Controlling for the interaction between defensive and strategic restructuring, however, changes the picture significantly. Employment reductions then do have positive performance effects. There are also significant complementarities between defensive restructuring and strategic changes in skill and output mix. We provide the first in-depth analysis of the anatomy of restructuring in this important industry. Our analysis re-enforces the view that downsizing works best when accompanied by strategic restructuring.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 6836.

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Date of creation: May 2008
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Handle: RePEc:cpr:ceprdp:6836

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Related research
Keywords: defensive and strategic restructuring; downsizing; labour effects of deregulation; panel data;

Find related papers by JEL classification:
J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
L92 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Railroads and Other Surface Transportation

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  5. Baily, Martin Neil & Bartelsman, Eric J & Haltiwanger, John, 1996. " Downsizing and Productivity Growth: Myth or Reality?," Small Business Economics, Springer, vol. 8(4), pages 259-78, August.
    Other versions:
  6. Eli Berman & John Bound & Zvi Griliches, 1994. "Changes in the Demand for Skilled Labor within U.S. Manufacturing Industries: Evidence from the Annual Survey of Manufacturing," NBER Working Papers 4255, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  7. James D. Adams, 1997. "The Structure of Firm R&D and the Factor Intensity of Production," NBER Working Papers 6099, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  8. Alan Collins & Richard I.D. Harris, 1999. "Downsizing and productivity: The case of UK motor vehicle manufacturing 1974-1994," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 20(5), pages 281-290.
  9. Aguirregabiria, V & Alonso-Borrego, C, 1997. "Employment Occupational Structure, Technological Capital and Reorganization of Production," UWO Department of Economics Working Papers 9703, University of Western Ontario, Department of Economics.
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  11. Ivaldi, Marc & McCullough, Gerard, 2005. "Welfare Trade-Offs in US Rail Mergers," CEPR Discussion Papers 5000, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  12. Wendy Carlin & Steven Fries & Mark Schaffer & Paul Seabright, 2001. "Competition and Enterprise Performance in Transition Economies: Evidence from a Cross-country Survey," William Davidson Institute Working Papers Series 376, William Davidson Institute at the University of Michigan Stephen M. Ross Business School. [Downloadable!]
    Other versions:
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