IDEAS home Printed from https://ideas.repec.org/a/fip/fedmqr/y2001isprp3-29nv.25no.2.html
   My bibliography  Save this article

Competition at work : railroads vs. monopoly in the U.S. shipping industry

Author

Listed:
  • Thomas J. Holmes
  • James A. Schmitz

Abstract

This study primarily establishes two things: (1) that monopoly has been pervasive in the U.S. water transportation industry in both the 19th and 20th centuries and has led to prices above competitive levels and the adoption of inefficient technologies and (2) that the competition of railroads has greatly weakened this monopolistic tendency, leading to lower water transport prices and fewer inefficient technologies. The study establishes these points using standard economic theory and extensive historical U.S. data on the behavior of unions and shipping companies. These gains from competition have been ignored by researchers studying the contribution of railroads to U.S. economic growth. Researchers have assumed that if railroads had not been developed, the long-distance transportation industry would have been competitive. This study shows that it would not have been. The quantitative estimates of previous studies thus are likely to have significantly understated the gains from the development of railroads.

Suggested Citation

  • Thomas J. Holmes & James A. Schmitz, 2001. "Competition at work : railroads vs. monopoly in the U.S. shipping industry," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Spr, pages 3-29.
    • Handle: RePEc:fip:fedmqr:y:2001:i:spr:p:3-29:n:v.25no.2
    as

    Download full text from publisher

    File URL: http://minneapolisfed.org/research/qr/qr2521.html
    Download Restriction: no
    File URL: http://minneapolisfed.org/research/qr/qr2521.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. John R. Commons, 1905. "Types of American Labor Unions: The 'Longshoremen of the Great Lakes," The Quarterly Journal of Economics, Oxford University Press, vol. 20(1), pages 59-85.
    2. Romer, Paul, 1994. "New goods, old theory, and the welfare costs of trade restrictions," Journal of Development Economics, Elsevier, vol. 43(1), pages 5-38, February.
    3. Thomas J. Holmes & James A. Schmitz, 1995. "Resistance to new technology and trade between areas," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win, pages 2-17.
    4. Steven Tadelis & Oliver E.Williamson, 2012. "Transaction Cost Economics," Introductory Chapters,in: Robert Gibbons & John Roberts (ed.), : The Handbook of Organizational Economics Princeton University Press.
    5. Grossman, Sanford J & Hart, Oliver D, 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 691-719, August.
    6. Edward C. Prescott & Stephen L. Parente, 1999. "Monopoly Rights: A Barrier to Riches," American Economic Review, American Economic Association, vol. 89(5), pages 1216-1233, December.
    7. Joseph Farrell & Nancy T. Gallini, 1988. "Second-Sourcing as a Commitment: Monopoly Incentives to Attract Competition," The Quarterly Journal of Economics, Oxford University Press, vol. 103(4), pages 673-694.
    8. Philip Taft, 1946. "Dues and Initiation Fees in Labor Unions," The Quarterly Journal of Economics, Oxford University Press, vol. 60(2), pages 219-232.
    9. Francis McLaughlin, 1998. "The Replacement of the Knights of Labor by the International Longshoremen's Association in the Port of Boston," Boston College Working Papers in Economics 401, Boston College Department of Economics.
    10. Thomas J. Holmes & James A. Schmitz, 1994. "Resistance to technology and trade between areas," Staff Report 184, Federal Reserve Bank of Minneapolis.
    11. Thomas J. Holmes, 1990. "Consumer Investment in Product-Specific Capital: The Monopoly Case," The Quarterly Journal of Economics, Oxford University Press, vol. 105(3), pages 789-801.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Benjamin Bridgman & Shi Qi & James Schmitz, 2006. "Does Regulation Reduce Productivity? Evidence From Regulation of the U.S. Beet-Sugar Manufacturing Industry During the Sugar Acts, 1934-74," 2006 Meeting Papers 438, Society for Economic Dynamics.
    2. Steven J. Davis & Luis Rivera-Batiz, 2005. "The Climate for Business Development and Employment Growth in Puerto Rico," NBER Working Papers 11679, National Bureau of Economic Research, Inc.
    3. Jeremy Greenwood & David Weiss, 2013. "Mining Surplus: Modeling James A. Schmitz's Link Between Competition and Productivity," Economie d'Avant Garde Research Reports 22, Economie d'Avant Garde.
    4. Herrendorf, Berthold & Teixeira, Arilton, 2003. "Monopoly Rights can Reduce Income Big Time," CEPR Discussion Papers 3854, C.E.P.R. Discussion Papers.
    5. Lee, Choong Bae & Wan, Junbin & Shi, Wenming & Li, Kevin, 2014. "A cross-country study of competitiveness of the shipping industry," Transport Policy, Elsevier, vol. 35(C), pages 366-376.
    6. Thomas J. Holmes & David K. Levine & James A. Schmitz, 2012. "Monopoly and the Incentive to Innovate When Adoption Involves Switchover Disruptions," American Economic Journal: Microeconomics, American Economic Association, vol. 4(3), pages 1-33, August.
    7. Edward C. Prescott, 2002. "Prosperity and Depression: 2002 Richard T. Ely Lecture," Working Papers 618, Federal Reserve Bank of Minneapolis.
    8. Timothy Dunne & Shawn Klimek & James Schmitz, Jr., 2010. "Competition and Productivity: Evidence from the Post WWII U.S. Cement Industry," Working Papers 10-29, Center for Economic Studies, U.S. Census Bureau.
    9. Adom, Philip Kofi, 2015. "Asymmetric impacts of the determinants of energy intensity in Nigeria," Energy Economics, Elsevier, vol. 49(C), pages 570-580.
    10. Timothy J. Kehoe & Edward C. Prescott, 2002. "Great Depressions of the Twentieth Century," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 5(1), pages 1-18, January.
    11. Jerzmanowski, Michal, 2007. "Total factor productivity differences: Appropriate technology vs. efficiency," European Economic Review, Elsevier, vol. 51(8), pages 2080-2110, November.
    12. Seck, Abdoulaye, 2012. "International technology diffusion and economic growth: Explaining the spillover benefits to developing countries," Structural Change and Economic Dynamics, Elsevier, vol. 23(4), pages 437-451.
    13. Lai, Mingyong & Peng, Shuijun & BAO, Qun, 2006. "Technology spillovers, absorptive capacity and economic growth," China Economic Review, Elsevier, vol. 17(3), pages 300-320.
    14. Edward C. Prescott, 2002. "Prosperity and Depression," American Economic Review, American Economic Association, vol. 92(2), pages 1-15, May.
    15. Timothy J. Kehoe & Edward C. Prescott(), 2007. "Great depressions of the twentieth century," Monograph, Federal Reserve Bank of Minneapolis, number 2007gdott.

    More about this item

    Keywords

    Transportation ; Monopolies;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fip:fedmqr:y:2001:i:spr:p:3-29:n:v.25no.2. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jannelle Ruswick). General contact details of provider: http://edirc.repec.org/data/frbmnus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.