Deregulation,Mergers, and Employment in the Railroad Industry

Since 1978, there have been dramatic changes in the railroad industry with partial deregulation, a massive consolidation of firms, a reduction in the size of the rail network, and a dramatic reduction in employment. In this paper, we focus on the effects of deregulation, a change in the traffic characteristics, miles of road, and consolidation, on employment by Class I railroads. We develop and estimate a model that allows these effects to be identified, finding that the largest employment declines emanate from the direct effect of partial deregulation, while smaller, but still large, employment declines emanate from mergers and changes in traffic mix.