Railroad Economies of Scale, Scope, and Density Revisited

This paper develops an econometric cost model using publicly available data to examine average and marginal costs in the freight railroad industry. The model is decomposed into individual elasticity estimates for operating parameters to examine economies of scope. 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 2005 level. Results indicate that the railroad industry has effectively exhausted 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. Gains in reducing costs will have to come from changing technology and productivity aimed at increasing density in the short-run and total factor productivity in the long-run.

Language

  • English

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Filing Info

  • Accession Number: 01144675
  • Record Type: Publication
  • Files: TRIS
  • Created Date: Nov 1 2009 5:00PM