A re-examination of four decades’ deregulation effect on competition and productivity of the US freight rail transportation industry

Abstract

PurposeThe purpose of this study is to compare the competition and productivity of the US freight rail transportation industry for the past 41 years (1980 ∼ 2020), which consists of the two periods, before and after the abolishment of the Interstate Commerce Commission (ICC) in 1995.Design/methodology/approachThis study investigates any relationships between the market concentration index values and labor productivity values in the separate two periods, and how the existence of a regulatory body in the freight transportation market impacted the productivity of the freight rail transportation industry by using a Cobb–Douglas production function on annual financial statement data from the US stock exchange market.FindingsThis study found that, after the abolishment of the ICC: (1) the rail industry became less competitive, (2) even if the rail industry had an increasing labor productivity trend, there was a strong negative correlation between the market concentration index and labor productivity and (3) the rail industry’s total factor productivity was decreased.Originality/valueThis study is to find empirical evidence of the effect of the ICC abolishment on the competition and productivity levels in the US freight rail transportation industry using a continuous data set of 41-year financial statements, which is unique compared to previous studies.