Changes in railroad rates since the Staggers Act

The US railroad industry was substantially deregulated by the Staggers Act in 1980. While railroad rates, as measured by industry-wide revenue per ton-mile, declined since that time, it is unclear why rates declined. Changes in commodity mix, length of haul, shipment size, lading weight, equipment ownership, railroad costs, competition from other modes, and demand for railroad transportation have all played some role. This paper assesses the importance of each of these factors in explaining the decline in railroad rates since the Staggers Act. After controlling for changes in commodity mix, the analysis indicates that shippers received nearly $28 billion per year in rate reductions as a result of changes that took place between 1982 and 1996. The reduction in productivity-adjusted railroad costs explains almost 90% of the reduction in railroad rates, with other factors playing much lesser roles.