COST SAVINGS AND PRODUCTIVITY IN THE RAILROAD INDUSTRY. IN: RECENT DEVELOPMENTS IN TRANSPORT ECONOMICS

The level of costs and productivity gains has been heavily affected by railroad deregulation. In order to estimate a translog cost function an unbalanced panel of railroads from 1978 through 1989 are used. Cost savings from deregulation were initially modest but by 1989 cost savings were significantly higher due to the fact that costs were 40 percent lower than they would have been if regulation had continued. While the initial effects of deregulation on productivity gains were large, these effects have fallen through time and are now comparable to pre-deregulation levels.