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Using Stock Price Data to Measure the Effects of Regulation: The Interstate Commerce Act and the Railroad Industry


  • Robin A. Prager


This article uses financial data to measure the effects of the passage of the Interstate Commerce Act of 1887 and subsequent legislative and judicial developments on firms in the railroad industry. The results indicate that the Interstate Commerce Act had a significant positive impact on railroad stock prices and that court decisions in the 1890s which severely restricted the powers of the Interstate Commerce Commission caused negative stock price reactions. These findings offer support for the revisionist view of regulatory history, according to which the railroads welcomed regulation as a means of facilitating the enforcement of cartel-like agreements.

Suggested Citation

  • Robin A. Prager, 1989. "Using Stock Price Data to Measure the Effects of Regulation: The Interstate Commerce Act and the Railroad Industry," RAND Journal of Economics, The RAND Corporation, vol. 20(2), pages 280-290, Summer.
  • Handle: RePEc:rje:randje:v:20:y:1989:i:summer:p:280-290

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    References listed on IDEAS

    1. Benvignati, Anita M, 1982. "Interfirm Adoption of Capital-Goods Innovations," The Review of Economics and Statistics, MIT Press, vol. 64(2), pages 330-335, May.
    2. V. Kerry Smith, 1974. "The Implications of Regulation for Induced Technical Change," Bell Journal of Economics, The RAND Corporation, vol. 5(2), pages 623-632, Autumn.
    3. Nickell, Stephen J, 1979. "Estimating the Probability of Leaving Unemployment," Econometrica, Econometric Society, vol. 47(5), pages 1249-1266, September.
    4. Stoneman, P L, 1985. "Technological Diffusion : The Viewpoint of Economic Theory," The Warwick Economics Research Paper Series (TWERPS) 270, University of Warwick, Department of Economics.
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    Cited by:

    1. Lin, Carl, 2011. "Give Me Your Wired and Your Highly Skilled: Measuring the Impact of Immigration Policy on Employers and Shareholders," IZA Discussion Papers 5754, Institute for the Study of Labor (IZA).
    2. Stefanie Ann Lenway & Douglas A. Schuler, 1991. "The Determinants of Corporate Political Involvement in Trade Protection: The Case of the Steel Industry," NBER Chapters,in: Empirical Studies of Commercial Policy, pages 75-112 National Bureau of Economic Research, Inc.
    3. 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.
    4. Lin, Carl, 2012. "Less Myth, More Measurement: Decomposing Excess Returns from the 1989 Minimum Wage Hike," IZA Discussion Papers 6269, Institute for the Study of Labor (IZA).
    5. Stango, Victor, 2003. "Strategic Responses to Regulatory Threat in the Credit Card Market," Journal of Law and Economics, University of Chicago Press, vol. 46(2), pages 427-452, October.

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