Staggers Act Articles and Research Papers
Appearing in Issues of Regulation Magazine
Thirty years ago, we published “The High Cost of Regulating U.S. Railroads” in Regulation. At the time, the Staggers Act had just been signed into law, so we took the opportunity to speculate about the “deregulated” railroad industry appearing on the U.S. horizon. Since that time, the railroad industry has had a generation to respond to regulatory incentives under the Staggers Act. We now have the opportunity to review the observations we made in our earlier paper, and offer some additional comments based on what has transpired.
On October 14, 1980, President Jimmy Carter signed the Staggers Act into law with the promises that the act would “help assure a strong and healthy future for our Nation’s railroads” and that “(I)t will benefit shippers throughout the country.” Now, thirty years later, we take a fairly long measure of how well the Staggers Act has lived up to these promises. We also venture some guesses as to what is in store for U.S. railroads and their shippers in the first half of the new century.
This paper appeared 30 years ago, at the dawn of the post-Staggers U.S. railroad industry. For the most part, we provided an analysis of the U.S. railroad industry’s performance for the generation immediately preceding the Staggers Act. We focused on the cost of pre-Staggers regulation and drew comparisons to the more liberalized Canadian railways. But we also took the opportunity to speculate about the “deregulated” railroad industry appearing on the U.S. horizon.
Total factor productivity growth in U.S. Railroads has long been a puzzle. Even though regulated, that industry’s productivity growth exceeded that of the private business sector, though slowing in the last years of regulation. After deregulation, things turned extremely positive, as we report here, though post-1996 railroad productivity has taken a sharp turn for the worse. We examine the 1974-2008 record and provide proximate determinants for the post-1996 developments. In the 1982 post-deregulation period we focus on merger gains derived from economies of density. The authors weigh-in at a critical juncture in the current regulatory debate.
B. Kelly Eakin, Philip E. Schoech and Joseph A. Swanson, “Total Factor Productivity in U.S. Class I Railroads, 1987-2008,” Presentation at the North American Productivity Workshop VI, Rice University, June 2010.
We estimate a variable cost function for the Class I railroad industry. We use the elasticity estimates to calculate total factor productivity (TFP) growth. TFP growth is separated into “explained” and “unexplained” components. The explained component consists of four impacts: output growth, network contraction, changes in the length of haul, and changes in capital stock. Marginal impacts of output growth and network size are approximate mirror images. We find that changes in traffic density account for almost all of the explained productivity growth. Furthermore, the marginal productivity impact of increased density in 2008 was about half what it was in 1987.