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Railroad Economies of Scale, Scope, and Density Revisited

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  • Bereskin, C. Gregory

Abstract

The movement of freight on railroads is subject to a number of technological characteristics that make costing of specific traffic a complex process. Among these restrictions are conditions of joint production, economies of scale, scope, and density, and a lack of data on specific expenditures related to individual freight movements. In this paper, an econometric cost model using publicly available data and methodology is developed for the examination of average and marginal costs in the industry. The model is decomposed into individual elasticity estimates for operating parameters to examine economies of scope. Finally, the size of the firm is varied through multiplying the capital stock measurements and estimating the cost behavior as firm capital stock is varied between one-quarter and two times the level of 2005. Results indicate that the railroad industry has effectively exhausted the possible economies of scale but can still gain from economies of density and scope. In addition, there appears to be little economic justification for mergers creating transcontinental railroad systems.

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  • Bereskin, C. Gregory, 2009. "Railroad Economies of Scale, Scope, and Density Revisited," Journal of the Transportation Research Forum, Transportation Research Forum, vol. 48(2).
    • Handle: RePEc:ags:ndjtrf:207130
    DOI: 10.22004/ag.econ.207130
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    References listed on IDEAS

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    1. Bereskin, C.Gregory, 2007. "Railroad Capital Stock Changes in the Post-Deregulation Period," Journal of the Transportation Research Forum, Transportation Research Forum, vol. 46(1).
    2. 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.
    3. Douglas W. Caves & Laurits R. Christensen & Joseph A. Swanson, 1981. "Economic Performance in Regulated and Unregulated Environments: A Comparison of U. S. and Canadian Railroads," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 96(4), pages 559-581.
    4. Caves, Douglas W & Christensen, Laurits R & Swanson, Joseph A, 1981. "Productivity Growth, Scale Economies, and Capacity Utilization in U.S. Railroads, 1955-74," American Economic Review, American Economic Association, vol. 71(5), pages 994-1002, December.
    5. John D. Bitzan & Theodore E. Keeler, 2003. "Productivity Growth and Some of Its Determinants in the Deregulated U.S. Railroad Industry," Southern Economic Journal, John Wiley & Sons, vol. 70(2), pages 232-253, October.
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    Cited by:

    1. Seedah, Dan & Harrison, Robert, 2010. "Measuring the Impact of Intermodal Rail Movements in State Transportation Planning," 51st Annual Transportation Research Forum, Arlington, Virginia, March 11-13, 2010 207257, Transportation Research Forum.
    2. David Besanko & Shana Cui, 2016. "Railway restructuring and organizational choice: network quality and welfare impacts," Journal of Regulatory Economics, Springer, vol. 50(2), pages 164-206, October.
    3. Martland, Carl D., 2012. "Productivity Improvements in the U.S. Rail Freight Industry, 1980-2010," Journal of the Transportation Research Forum, Transportation Research Forum, vol. 51(3).
    4. Martland, Carl D., 2012. "Productivity Improvements in the U.S. Rail Freight Industry 1980-2010," 53rd Annual Transportation Research Forum, Tampa, Florida, March 15-17, 2012 207088, Transportation Research Forum.

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