Econometric estimation of the effects of deregulation on railway productivity growth

This article examines the hypothesis that the market incentives following railroad deregulation led to a rapid rate of productivity growth as the railroads attempted to lower costs in order to compete in the freer market. This article concentrates on the rate of shift in the cost function rather than on the rate of shift in the production function as the most reasonable method for examining productivity growth. Following the general methodology of Spady and Friedlaender, the costing optimization criteria for the firm in the general case is defined as: C(Q,P;T) = Min P 'X ; Subject to F(X;T) = Q where Q = (Q1,Q2,...,Qn) is a vector of measures of output, P = (P1,P2,...,Pn) is a vector of factor input prices such that pi is the price of factor input xi, and T is the vector of technological factors.