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Wages in Rail Markets: Deregulation, Mergers, and Changing Networks Characteristics

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  • David E. Davis
  • Wesley W. Wilson

Abstract

The Staggers Act of 1980 largely deregulated the Class 1 Railroad industry and has had profound effects on labor. Between 1978 and 1994, employment in the industry decreased by about 60%, while real wages (average compensation) increased by over 40%. Earlier research examined employment effects; in this article, we develop and estimate compensation effects using firm‐level data. By using firm‐level data, we are able to identify the effects of partial deregulation, an accompanying and massive consolidation movement, as well as changes in firm operating and network characteristics. Our estimates suggest that mergers contributed 5‐15%, partial deregulation contributed about 20%, and changes in firm operating and network characteristics contributed 4‐5% to the overall increase in wages.

Suggested Citation

  • David E. Davis & Wesley W. Wilson, 2003. "Wages in Rail Markets: Deregulation, Mergers, and Changing Networks Characteristics," Southern Economic Journal, John Wiley & Sons, vol. 69(4), pages 865-885, April.
    • Handle: RePEc:wly:soecon:v:69:y:2003:i:4:p:865-885
    DOI: 10.1002/j.2325-8012.2003.tb00537.x
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    1. Davis, David E & Wilson, Wesley W, 1999. "Deregulation, Mergers, and Employment in the Railroad Industry," Journal of Regulatory Economics, Springer, vol. 15(1), pages 5-22, January.
    2. Ernst Berndt & Ann Friedlaender & Judy Chiang & Christopher Vellturo, 1993. "Cost effects of mergers and deregulation in the U.S. Rail industry," Journal of Productivity Analysis, Springer, vol. 4(1), pages 127-144, June.
    3. Wallace Hendricks, 1977. "Regulation and Labor Earnings," Bell Journal of Economics, The RAND Corporation, vol. 8(2), pages 483-496, Autumn.
    4. Talley, Wayne K, 2001. "Wage Differentials of Transportation Industries: Deregulation versus Regulation," Economic Inquiry, Western Economic Association International, vol. 39(3), pages 406-429, July.
    5. Wilson, Wesley W. & Wilson, William W., 2001. "Deregulation, rate incentives, and efficiency in the railroad market," Research in Transportation Economics, Elsevier, vol. 6(1), pages 1-24, January.
    6. James Peoples, 1998. "Deregulation and the Labor Market," Journal of Economic Perspectives, American Economic Association, vol. 12(3), pages 111-130, Summer.
    7. McFarland, Henry, 1989. "The Effects of United States Railroad Deregulation on Shippers, Labor, and Capital," Journal of Regulatory Economics, Springer, vol. 1(3), pages 259-270, September.
    8. McDonald, Ian M & Solow, Robert M, 1981. "Wage Bargaining and Employment," American Economic Review, American Economic Association, vol. 71(5), pages 896-908, December.
    9. Martinello, Felice, 1989. "Wage and Employment Determination in a Unionized Industry: The IWA and the British Columbia Wood Products Industry," Journal of Labor Economics, University of Chicago Press, vol. 7(3), pages 303-330, July.
    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. Clifford Winston, 1998. "U.S. Industry Adjustment to Economic Deregulation," Journal of Economic Perspectives, American Economic Association, vol. 12(3), pages 89-110, Summer.
    12. Barry T. Hirsch, 1988. "Trucking Regulation, Unionization, and Labor Earnings: 1973-85," Journal of Human Resources, University of Wisconsin Press, vol. 23(3), pages 296-319.
    13. Wilson, Wesley W, 1997. "Cost Savings and Productivity in the Railroad Industry," Journal of Regulatory Economics, Springer, vol. 11(1), pages 21-40, January.
    14. Wilson, Wesley W, 1994. "Market-Specific Effects of Rail Deregulation," Journal of Industrial Economics, Wiley Blackwell, vol. 42(1), pages 1-22, March.
    15. Rose, Nancy L, 1987. "Labor Rent Sharing and Regulation: Evidence from the Trucking Industry," Journal of Political Economy, University of Chicago Press, vol. 95(6), pages 1146-1178, December.
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    Cited by:

    1. Shaik, Saleem & Allen, Albert J. & Myles, Albert E. & Yeboah, Osei-Agyeman, 2008. "Importance of Financial Variables on Efficiency of Class I Railroads in the United States," 2008 Annual Meeting, February 2-6, 2008, Dallas, Texas 6874, Southern Agricultural Economics Association.
    2. Siew Hoon Lim & C.A. Knox Lovell, 2009. "Profit and productivity of US Class I railroads," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 30(7), pages 423-442.

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    More about this item

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D4 - Microeconomics - - Market Structure, Pricing, and Design

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