Transporting export-bound grain by rail: Rail rates in the Post-Staggers Rail Act Period

A spatial analysis involving four origin states (Illinois, Iowa, Minnesota and Nebraska) and two destinations (Gulf of Mexico and Pacific Northwest) is conducted in order to determine if pricing practices by the same or different railroads in different regions are consistent. A system of structural equations is estimated and dynamic regression tests are conducted because of the dynamic nature of interregional trade and arbitrage activities. The results indicate that the railroad industry is noncompetitive and that rail rates converge at a different speed to their desired levels in different regions. This may be partly due to the increased concentration in the railroad industry that took place during last twenty years.