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Abstract
Since partial deregulation of the railroad industry in 1980, rail rates have fallen in real terms, leading many observers to conclude that deregulation has been a success. Yet, previous studies of the effects of deregulation on aggregate rate levels are inconclusive in identifying deregulation as the reason for lower rates. In this paper, I develop a conceptual model that nests a variety of possible effects of deregulation on the rates charged for transporting individual commodities. Deregulation may affect rates differently depending on the nature of pricing in regulated and non-regulated states, the level of cost savings from deregulation, and the price elasticity of demand. The model is used to examine the effects of deregulation on 34 different commodity classifications. The results suggest deregulation significantly affected almost all commodities, affected commodities asymmetrically, and had effects that vary through time. Initially, deregulation increased rates for some commodities, had no effect on others, and decreased rates on still others. However, by 1988, deregulation lessened rates for almost all commodities, with the largest declines being associated with long hauls and heavy loads.
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