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EFFICIENCY OF THE RAILROAD INDUSTRY : A FRONTIER PRODUCTION FUNCTION APPROACH

Richard Grabowski, Seyed M. Mehdian

Open publisher page 13 citations

Abstract

This paper uses a production frontier method to measure the revenue efficiency of the railroad industry in the U.S. from 1951 to 1981. The form specified for the frontier is a ray-homothetic production function. It allows returns to scale to vary with output and factor intensity. In addition, it is possible to determine to what extent revenue inefficiency was the result of operating at the inappropriate scale and what part was due to wasting resources. The results indicate that there was little inefficiency due to wasting resources. The main source of inefficiency was operation at decreasing returns to scale.

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What this paper is about

This paper uses a production frontier method to measure the revenue efficiency of the railroad industry in the U.S. from 1951 to 1981. The form specified for the frontier is a ray-homothetic production function. It allows returns to scale to vary with output and factor intensity. In addition, it is possible to determine to what extent revenue inefficiency was the result of operating at the inappropriate scale and what part was due to wasting resources. The results indicate that there was little inefficiency due to wasting resources. The main source of inefficiency was operation at decreasing returns to scale.

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OpenAlex reports 13 citations for this work. Citation counts describe recorded attention and do not establish research quality.

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Available abstract

This paper uses a production frontier method to measure the revenue efficiency of the railroad industry in the U.S. from 1951 to 1981. The form specified for the frontier is a ray-homothetic production function. It allows returns to scale to vary with output and factor intensity. In addition, it is possible to determine to what extent revenue inefficiency was the result of operating at the inappropriate scale and what part was due to wasting resources. The results indicate that there was little inefficiency due to wasting resources. The main source of inefficiency was operation at decreasing returns to scale.

Key concepts: Inefficiency, Production (economics), Production–possibility frontier, Economics, Returns to scale, Revenue, Frontier, Production function

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