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The Cost of Railroad Regulation: The Disintegration of American Agricultural Markets in the Interwar Period

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Author Info

  • Giovanni Federico

    (European University Institute, Firenze)

  • Paul Sharp

    (Department of Economics, University of Copenhagen)

Abstract

We investigate the costs of transportation regulation using the example of agricultural markets in the United States. Using a large database of prices by state of agricultural commodities, we find that the coefficient of variation (as a measure of market integration between states) falls for many commodities until the First World War. We demonstrate that this reflected changes in transportation costs which in turn in the long run depended on productivity growth in railroads. 1920 marked a change in this relationship, however, and between the First and Second World Wars we find considerable disintegration of agricultural markets, ultimately as a consequence of the 1920 Transportation Act. We argue that this benefited railroad companies in the 1920s and workers in the 1930s, and we put forward an estimate of the welfare losses for the consumers of railroad services (i.e. agricultural producers and final consumers).

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Bibliographic Info

Paper provided by University of Copenhagen. Department of Economics in its series Discussion Papers with number 11-17.

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Length: 26 pages
Date of creation: Jun 2011
Date of revision:
Handle: RePEc:kud:kuiedp:1117

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Keywords: market integration; price convergence; United States; agriculture; transportation regulation;

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Cited by:
  1. Sharp, Paul & Uebele, Martin, 2013. "Rural Infrastructure and Agricultural Market Integration in the United States: A long run perspective," Discussion Papers of Business and Economics 10/2013, Department of Business and Economics, University of Southern Denmark.

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