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Modernizing U.S. Freight Rail Regulation

Author

Listed:
  • Richard L. Schmalensee

    (MIT)

  • Wesley W. Wilson

    (University of Oregon)

Abstract

By 1970, regulation of railroads under the Interstate Commerce Act of 1887 had resulted in an industry that was in financial ruin and unresponsive to changes in the marketplace. Subsequent legislation, which culminated in the Staggers Rail Act of 1980, was intended to resurrect the industry and did so. A Congressionally-mandated National Academy of Sciences study examined trends in the industry and the current regulatory regime and offered a number of recommendations, arguing that modernization can yield substantial benefits by modernizing what has become an outdated and ineffective system. This paper summaries some of the main findings of that study.

Suggested Citation

  • Richard L. Schmalensee & Wesley W. Wilson, 2016. "Modernizing U.S. Freight Rail Regulation," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 49(2), pages 133-159, September.
    • Handle: RePEc:kap:revind:v:49:y:2016:i:2:d:10.1007_s11151-016-9515-2
    DOI: 10.1007/s11151-016-9515-2
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    References listed on IDEAS

    as
    1. Wesley W. Wilson & Frank A. Wolak, 2016. "Freight Rail Costing and Regulation: The Uniform Rail Costing System," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 49(2), pages 229-261, September.
    2. Bruce Blonigen & Anca Cristea, 2013. "The Effects of the Interstate Commerce Act on Transport Costs: Evidence from Wheat Prices," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 43(1), pages 41-62, August.
    3. Russell Pittman, 2010. "Against the stand-alone-cost test in U.S. freight rail regulation," Journal of Regulatory Economics, Springer, vol. 38(3), pages 313-326, December.
    4. James Peoples, 2013. "The Legacy of the Interstate Commerce Act and Labor: Legislation, Unionization, and Labor Earnings in Surface Transportation Services," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 43(1), pages 63-84, August.
    5. Wesley Wilson, 2013. "Introduction: The Interstate Commerce Act of 1887," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 43(1), pages 3-6, August.
    6. Kenneth Boyer, 2013. "Understanding ICC Rate Structure Regulation: A Spatial Analysis," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 43(1), pages 121-144, August.
    7. Burton, Mark L, 1993. "Railroad Deregulation, Carrier Behavior, and Shipper Response: A Disaggregated Analysis," Journal of Regulatory Economics, Springer, vol. 5(4), pages 417-434, December.
    8. Timothy Brennan, 2013. "Mitigating Monopoly or Preventing Discrimination: Comparing Antitrust to Regulatory Goals in the Interstate Commerce Act," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 43(1), pages 103-119, August.
    9. Grimm, Curtis M. & Plaistow, Joseph J., 1999. "Competitive Effects of Railroad Mergers," Journal of the Transportation Research Forum, Transportation Research Forum, vol. 38(1).
    10. James M. MacDonald & Linda C. Cavalluzzo, 1996. "Railroad Deregulation: Pricing Reforms, Shipper Responses, and the Effects on Labor," ILR Review, Cornell University, ILR School, vol. 50(1), pages 80-91, October.
    11. John Bitzan & Wesley Wilson, 2007. "Industry costs and consolidation: efficiency gains and mergers in the U.S. railroad industry," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 30(2), pages 81-105, March.
    12. Clifford Winston, 1998. "U.S. Industry Adjustment to Economic Deregulation," Journal of Economic Perspectives, American Economic Association, vol. 12(3), pages 89-110, Summer.
    13. John Brown, 2013. "The ‘Railroad Problem’ and the Interstate Commerce Act," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 43(1), pages 7-19, August.
    14. Unknown, 2014. "Department Publications 2013," Publications Lists 206935, University of Minnesota, Department of Applied Economics.
    15. Kevin Henrickson & Wesley Wilson, 2013. "Voting, Regulation, and the Railroad Industry: An Analysis of Private and Public Interest Voting Patterns," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 43(1), pages 21-39, August.
    16. James MacDonald, 2013. "Railroads and Price Discrimination: The Roles of Competition, Information, and Regulation," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 43(1), pages 85-101, August.
    17. Pittman, Russell W, 1990. "Railroads and Competition: The Santa Fe/Southern Pacific Merger Proposal," Journal of Industrial Economics, Wiley Blackwell, vol. 39(1), pages 25-46, September.
    18. Nicholas Economides & Lawrence J. White, 1995. "Access and Interconnection Pricing: How Efficient is the Efficient Component Pricing Rule?," Working Papers 95-04, New York University, Leonard N. Stern School of Business, Department of Economics.
    19. Faulhaber, Gerald R, 1975. "Cross-Subsidization: Pricing in Public Enterprises," American Economic Review, American Economic Association, vol. 65(5), pages 966-977, December.
    20. Clifford Winston & Vikram Maheshri & Scott M. Dennis, 2011. "Long-Run Effects of Mergers: The Case of U.S. Western Railroads," Journal of Law and Economics, University of Chicago Press, vol. 54(2), pages 275-304.
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    22. Rhodes, George F, Jr & Westbrook, M Daniel, 1986. "Econometric Analysis of Costing System Components in Rail Rate Regulation," Journal of Business & Economic Statistics, American Statistical Association, vol. 4(3), pages 289-303, July.
    23. Wilson, Wesley W, 1997. "Cost Savings and Productivity in the Railroad Industry," Journal of Regulatory Economics, Springer, vol. 11(1), pages 21-40, January.
    24. Wilson, Wesley W, 1994. "Market-Specific Effects of Rail Deregulation," Journal of Industrial Economics, Wiley Blackwell, vol. 42(1), pages 1-22, March.
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    Citations

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    Cited by:

    1. Wesley W. Wilson & Frank A. Wolak, 2018. "Benchmark Regulation of Multiproduct Firms: An Application to the Rail Industry," NBER Working Papers 25268, National Bureau of Economic Research, Inc.
    2. Devin Serfas & Richard Gray & Peter Slade, 2018. "Congestion and Distribution of Rents in Wheat Export Sector: A Canada–U.S. Cross†Border Comparison," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 66(2), pages 187-207, June.

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    More about this item

    Keywords

    Railroad regulation; Staggers act; Captive shippers; Revenue adequacy; Arbitration; Mergers; Rates;
    All these keywords.

    JEL classification:

    • L9 - Industrial Organization - - Industry Studies: Transportation and Utilities
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L92 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Railroads and Other Surface Transportation

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