MPC Research Reports
Report Details

Title:	Industry Costs and Consolidation: Efficiency Gains and Mergers in the Railroad Industry
Authors:	John Bitzan and Wesley W. Wilson
University:	North Dakota State University
Publication Date:	Jun 2003
Report #:	MPC-03-145
Project #:	MPC-220
TRID #:	00960460
Keywords:	consolidations, costs, deregulation, economic impacts, mergers, railroads, savings

Abstract

Partial deregulation of the railroad industry substantially eased regulatory impediments to consolidation. Since partial deregulation, there has been a massive consolidation of firms in the railroad industry, which has been premised on efficiency gains, network rationalization, and service quality. In this paper, we focus on efficiency gains. We develop and estimate a model of costs that allows for the estimation of merger specific cost savings as well as industry cost savings. The results suggest that early mergers gave very small effects, but recent "mega" mergers have given very large effects. Our central result is that consolidation in the railroad industry from 1983-1997 accounts for about a 17 percent reduction in industry costs.