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The cost of railroad regulation: the disintegration of American agricultural markets in the interwar period

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  • Giovanni Federico
  • Paul Sharp

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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  • Giovanni Federico & Paul Sharp, 2013. "The cost of railroad regulation: the disintegration of American agricultural markets in the interwar period," Economic History Review, Economic History Society, vol. 66(4), pages 1017-1038, November.
  • Handle: RePEc:bla:ehsrev:v:66:y:2013:i:4:p:1017-1038
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    File URL: http://hdl.handle.net/10.1111/1468-0289.12009
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    4. Chilosi, David & Federico, Giovanni, 2015. "Early globalizations: The integration of Asia in the world economy, 1800–1938," Explorations in Economic History, Elsevier, vol. 57(C), pages 1-18.

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    More about this item

    JEL classification:

    • K23 - Law and Economics - - Regulation and Business Law - - - Regulated Industries and Administrative Law
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • N5 - Economic History - - Agriculture, Natural Resources, Environment and Extractive Industries
    • N7 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services

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