In order to determine the effects of domestic airline regulation on the fares and market efficiency of the American air transportation industry, it is necessary to know what fares would be if air travel markets were unregulated. To answer this question, a long-run airline cost model is developed and estimated, and it is used to predict hypothetical unregulated (or cost-based) fares for 30 major domestic air travel markets. As a test, the model is used to predict fares on the relatively unregulated California intrastate routes, which it does quite accurately, though a number of such routes observed is small. The results of the study indicate that as of 1968, regulated routes had markups over the estimated unregulated fare ranging 20 to 95 percent, with a distinct tendency for markups to rise with distance. Crudely updated to 1972, the results indicate current markups of 48 to 84 percent, with less correlation between markup and distance.
Economic analysis has enhanced our understanding of the efficacy of highway safety regulations. Specifically, a consumer-theoretic literature has developed on drivers' responses to regulations, based on ideas first set forth by Lester lave and W. E. Weber (1970) and more fully thought out by Sam Peltzman (1975). Meanwhile, an empirical literature has also developed, testing hypotheses relating to the effects on safety of speed limits, safety-device regulations, and alcohol policies, among other things. yet, despite extensive research, controversies remain as to the effects of regulations on highway safety. This paper contributes to the literature on economic aspects of highway safety in an four important ways: First, it is based on a county-level data set for the U. S. for 1970 and !980, affording over 2,600 observations each year in a consistent panel, many more observations than previous studies have used. Second, this study uses different and more appropriate estimation procedures than most previous studies, allowing for the count nature of highway fatalities and correcting for omitted-variable bias otherwise possible in cross-section analysis. Third, the model used here controls for more variables in a single model than previous studies. Finally, this study allows for important differences in the estimated coefficients between urban and rural driving environments.
There is a potential bias in cross-sectional estimates of the effects of cigarette prices on cigarette consumption. States with the strongest antismoking sentiment will likely have the highest cigarette taxes, which result in the highest prices. Some of the lower consumption of cigarettes in high-tax states will result from such sentiments, rather than from higher taxes, so the estimated effect of cigarette taxes on consumption will be overstated. This study corrects for such bias, employing panel data for U.S. states from 1960 to 1990. We find that controlling for this bias reduces the estimated consumer response to cigarette price change by 40-50 percent.
This study analyzes the effects of an important postderegulation innovation on rail freight productivity: the elimination of cabooses and related crew members. It also analyzes the overall growth of productivity in rail freight between 1983 and 1997 (using a translog rail cost function estimated over a sample of Class I railroads between 1983 and 1997). The results indicate that elimination of cabooses and associated crew members from freight trains reduced costs by 5‐8% on the typical Class I railroad in 1997, equivalent to an annual cost saving of $2 billion to $3.3 billion for all Class I railroads. Moreover, if Class I railroads had no other technological advances since 1983, their 1997 costs (with 1997 factor prices) would have been 36‐43% higher than they in fact were. Finally, the results show that overall productivity growth in rail freight did not decelerate between 1983 and 1997; if anything, it accelerated slightly.
This paper provides a dynamic analysis of the effects of the Motor Carrier Act of 1980 on the freight rates of Class I and II common general freight carriers. In addition to estimating rate equations, cost functions are also estimated to derive reliable measures of marginal cost. The specified rate equation also includes variables expected to affect the elasticity of demand. Simulations indicate that deregulation reduced rates in the 15-20% range by 1983 and in the 25-35% range by 1985, showing that the effect has grown over time.
