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Deregulation, Mergers, and Cost Savingsin Class I U.S. Railroads, 1974‐1986

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  • Christopher A. Vellturo
  • Ernst R. Berndt
  • Ann F. Friedlaender
  • Judy Shaw‐Er Wang Chiang
  • Mark H. Showalter

Abstract

In this paper we attempt to disentangle the effects of deregulation on rail costs from those directly attributable to mergers. We estimate that cost reductions obtained from mergers ranged from a high of 33% for the Burlington Northern to a low of a 3% cost increase for the CSX. However, firms not engaged in significant merger activities experienced similar cost differentials indicating that consolidation was not a prerequisite for cost savings. We conclude that although mergers did confer some benefits on the participating firms, they were not a prerequisite for railroads being able to achieve substantial cost savings.

Suggested Citation

  • Christopher A. Vellturo & Ernst R. Berndt & Ann F. Friedlaender & Judy Shaw‐Er Wang Chiang & Mark H. Showalter, 1992. "Deregulation, Mergers, and Cost Savingsin Class I U.S. Railroads, 1974‐1986," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 1(2), pages 339-369, June.
  • Handle: RePEc:bla:jemstr:v:1:y:1992:i:2:p:339-369
    DOI: 10.1111/j.1430-9134.1992.00339.x
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    References listed on IDEAS

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    1. Ann F. Friedlaender & Ernst R. Berndt & Gerard McCullough, 1992. "Governance Structure, Managerial Characteristics, and Firm Performance in the Deregulated Rail Industry," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 23(1992 Micr), pages 95-186.
    2. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-838, May.
    3. Mundlak, Yair, 1978. "On the Pooling of Time Series and Cross Section Data," Econometrica, Econometric Society, vol. 46(1), pages 69-85, January.
    4. Keeler, Theodore E, 1974. "Railroad Costs, Returns to Scale, and Excess Capacity," The Review of Economics and Statistics, MIT Press, vol. 56(2), pages 201-208, May.
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