IDEAS home Printed from
   My bibliography  Save this paper

Econometric analysis of productivity with measurement error: Empirical application to the US Railroad industry


  • Coublucq, Daniel


This paper analyzes the productivity in the US rail industry for the period 1980 - 2006. I propose a value-added production framework to circumvent the problem of measurement error in one input. I find evidence showing that aggregate productivity gains can be attributed to returns to scale and the reshuffling of resources to more efficient firms. However, productivity slows down for the period 1995 - 2000 after important concentrations. I also look at the correlations between firm-level productivity and the operating environment. My results show that failing to control for the omitted price variable bias leads to an overestimation of productivity gains.

Suggested Citation

  • Coublucq, Daniel, 2013. "Econometric analysis of productivity with measurement error: Empirical application to the US Railroad industry," DICE Discussion Papers 95, University of Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
  • Handle: RePEc:zbw:dicedp:95

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. Ivaldi Marc & Mccullough Gerard, 2008. "Subadditivity Tests for Network Separation with an Application to U.S. Railroads," Review of Network Economics, De Gruyter, vol. 7(1), pages 1-13, March.
    2. Dubois, Pierre & Nauges, Céline, 2010. "Identifying the effect of unobserved quality and expert reviews in the pricing of experience goods: Empirical application on Bordeaux wine," International Journal of Industrial Organization, Elsevier, vol. 28(3), pages 205-212, May.
    3. Ulrich Doraszelski & Mark Satterthwaite, 2010. "Computable Markov-perfect industry dynamics," RAND Journal of Economics, RAND Corporation, vol. 41(2), pages 215-243.
    4. Klette, Tor Jakob & Griliches, Zvi, 1996. "The Inconsistency of Common Scale Estimators When Output Prices Are Unobserved and Endogenous," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 11(4), pages 343-361, July-Aug..
    5. Ivaldi, M & McCullough, G J, 2001. "Density and Integration Effects on Class I U.S. Freight Railroads," Journal of Regulatory Economics, Springer, vol. 19(2), pages 161-182, March.
    6. 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.
    7. Ann F. Friedlaender, 1992. "Coal Rates and Revenue Adequacy in a Quasi-Regulated Rail Industry," RAND Journal of Economics, The RAND Corporation, vol. 23(3), pages 376-394, Autumn.
    8. Richard Ericson & Ariel Pakes, 1995. "Markov-Perfect Industry Dynamics: A Framework for Empirical Work," Review of Economic Studies, Oxford University Press, vol. 62(1), pages 53-82.
    9. Erik Brynjolfsson & Lorin M. Hitt, 2003. "Computing Productivity: Firm-Level Evidence," The Review of Economics and Statistics, MIT Press, vol. 85(4), pages 793-808, November.
    10. Ivaldi, Marc & McCullough, Gerard, 2005. "Welfare Trade-Offs in US Rail Mergers," CEPR Discussion Papers 5000, C.E.P.R. Discussion Papers.
    11. Petia Topalova & Amit Khandelwal, 2011. "Trade Liberalization and Firm Productivity: The Case of India," The Review of Economics and Statistics, MIT Press, vol. 93(3), pages 995-1009, August.
    12. Ackerberg, Daniel & Caves, Kevin & Frazer, Garth, 2006. "Structural identification of production functions," MPRA Paper 38349, University Library of Munich, Germany.
    13. 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.
    14. Ann F. Friedlaender & Ernst R. Berndt & Judy Shaw-Er Wang Chiang & Mark Showalter & Christopher A. Vellturo, 1991. "Rail Costs and Capital Adjustments in a Quasi-Regulated Environment," NBER Working Papers 3841, National Bureau of Economic Research, Inc.
    15. Wilson, Wesley W, 1997. "Cost Savings and Productivity in the Railroad Industry," Journal of Regulatory Economics, Springer, vol. 11(1), pages 21-40, January.
    16. Wilson, Wesley W, 1994. "Market-Specific Effects of Rail Deregulation," Journal of Industrial Economics, Wiley Blackwell, vol. 42(1), pages 1-22, March.
    17. Waters II, William G., 2007. "Evolution of Railroad Economics," Research in Transportation Economics, Elsevier, vol. 20(1), pages 11-67, January.
    18. Ellig, Jerry, 2002. "Railroad Deregulation and Consumer Welfare," Journal of Regulatory Economics, Springer, vol. 21(2), pages 143-167, March.
    Full references (including those not matched with items on IDEAS)

    More about this item


    industry dynamics; measurement error; productivity; selection; simultaneity; railroad industry;

    JEL classification:

    • C24 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Truncated and Censored Models; Switching Regression Models; Threshold Regression Models
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L50 - Industrial Organization - - Regulation and Industrial Policy - - - General
    • L92 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Railroads and Other Surface Transportation
    • L98 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Government Policy

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    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:zbw:dicedp:95. 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: (ZBW - German National Library of Economics). General contact details of provider: .

    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.