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THE IMPACT OF DEREGULATION ON THE PRODUCTION STRUCTURE OF THE MOTOR CARRIER INDUSTRY

Β. Starr McMullen, Linda R. Stanley

Open publisher page 50 citations

Abstract

Empirical analysis of the motor carrier industry pre‐ and post‐regulatory reform reveals that deregulation resulted in significant changes in firm production structure and lower real average costs. Translog cost functions for firms operating in 1977 and 1983 were estimated and compared for “other specialized commodity” carriers. Fitted average costs were computed from these functions. The results indicate significant differences in the cost functions and real costs that cannot be attributed to technological changes but rather suggest efficiency gains. The results also suggest that it is inappropriate to predict outcomes of deregulation using empirical analyses of firms in the regulated environment.

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What this paper is about

Empirical analysis of the motor carrier industry pre‐ and post‐regulatory reform reveals that deregulation resulted in significant changes in firm production structure and lower real average costs. Translog cost functions for firms operating in 1977 and 1983 were estimated and compared for “other specialized commodity” carriers. Fitted average costs were computed from these functions. The results indicate significant differences in the cost functions and real costs that cannot be attributed to technological changes but rather suggest efficiency gains. The results also suggest that it is inappropriate to predict outcomes of deregulation using empirical analyses of firms in the regulated environment.

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Available abstract

Empirical analysis of the motor carrier industry pre‐ and post‐regulatory reform reveals that deregulation resulted in significant changes in firm production structure and lower real average costs. Translog cost functions for firms operating in 1977 and 1983 were estimated and compared for “other specialized commodity” carriers. Fitted average costs were computed from these functions. The results indicate significant differences in the cost functions and real costs that cannot be attributed to technological changes but rather suggest efficiency gains. The results also suggest that it is inappropriate to predict outcomes of deregulation using empirical analyses of firms in the regulated environment.

Key concepts: Deregulation, Motor carrier, Economics, Commodity, Production (economics), Production cost, Industrial organization, Cost structure

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