Restructuring regulation of the rail industry for the public interest

Throughout the world, the rail industry historically has been one of the most extensively regulated of all sectors. Price, entry, exit, financial structure, accounting methods, vertical relations, and operating rules have all been subject to some form of government control. The public utility paradigm of government regulation has been applied on the assumption that the economic characteristics of the rail industry preclude competitive organization or the need for market responsiveness. In the past three decades, however, policymakers and economists have become increasingly critical of traditional regulation of the rail industry. It is generally accepted that in markets where rail carriers seek to meet demand, there is often effective competition, and that government restrictions on the structure and conduct of firms in this industry impose considerable costs on society. Misguided regulatory policies have been blamed for the misallocation of freight traffic among competing modes of transport, excess capacity, excessive operating costs, and poor investment decisions. Regulatory controls have also shouldered much of the blame for the poor financial condition of railroads, the deterioration of rail plant, the suppression and delay of cost-reducing innovations, and the mediocre quality of rail service. The authors suggest principles for restructuring railroad regulation - indeed, for restructuring the orientation of railroad entries - for the sake of public interest. Much can be learned, they contend, from applying the principles of industrial organization to analysis of the rail industry. To assess the implications of policies aimed at rate regulation or infrastructure, it is essential to understand the nature of technology, costs, and demand in the rail industry. Government's role in relation to market behavior should be based explicitly on the economic and technological realities of the railroad marketplace. The authors say that restructuring along the lines they suggest - putting more emphasis on marketing effectiveness - will result in a more profitable railway with a better chance of covering its costs for commercial services. Changing the basis for noncommercial services as they suggest will make those services more effective at fulfilling public policy objectives, will eliminate an insuperable drain on revenues that condemns rails to inadequate investment, and will eliminate cross-subsidies that make it difficult for rails to compete against other modes of transport.Markets and Market Access,Economic Theory&Research,Environmental Economics&Policies,Decentralization,Enterprise Development&Reform,Banks&Banking Reform,Economic Theory&Research,Environmental Economics&Policies,Markets and Market Access,Access to Markets

Competition and innovation-driven inclusive growth

The paper investigates the strength of innovation-driven employment growth, the role of competition in stimulating and facilitating it, and whether it is inclusive. In a sample of more than 26,000 manufacturing establishments across 71 countries (both OECD and developing), the authors find that firms that innovate in products or processes, or that have attained higher total factor productivity, exhibit higher employment growth than non-innovative firms. The strength of firms'innovation-driven employment growth is significantly positively associated with the share of the firms'workforce that is unskilled, debunking the conventional wisdom that innovation-driven growth is not inclusive in that it is focused on jobs characterized by higher levels of qualification. They also find that young firms have higher propensities for product or process innovation in countries with better Doing Business ranks (both overall and ranks for constituent components focused on credit availability and property registration). Firms generally innovate more and show greater employment growth if they are exposed to more information (through internet use and membership in business organizations) and are exporters. The empirical results support the policy propositions that innovation is a powerful driver of employment growth, that innovation-driven growth is inclusive in its creation of unskilled jobs, and that the underlying innovations are fostered by a pro-competitive business environment providing ready access to information, financing, export opportunities, and other essential business services that facilitate the entry and expansion of young firms.Environmental Economics&Policies,Labor Policies,Labor Markets,E-Business,Microfinance

Parity Pricing and Its Critics: A Necessary Condition for Efficiency in the Provision of Bottleneck Services to Competitors

This paper discusses proper pricing of a monopoly input needed by both its owner and its owner\u27s competitors in the final-product market. This issue is central to current litigation in courts and regulatory agencies throughout the world\u27s industrial nations as competitive entry, deregulation, and privatization proceed. A new, simplified proof shows that only pricing based on what has come to be called the parity-pricing formula or efficient component-pricing rule ( ECPR ) permits economic efficiency and competitive neutrality-giving neither the bottleneck owner nor its rivals a competitive advantage in final-product sales, aside from any derived from superior productive efficiency. This paper comments on a number of recent discussions of ECPR, showing that the bulk of their reservations, while valid, do not undermine ECPR, but, instead, call for supplementary rules that we have advocated all along

What Consensus? Ideology, Politics and Elections Still Matter

This article, which was prepared for an ABA Antitrust Section Panel, discusses the role of ideology and politics in antitrust enforcement and the impact of elections in the last twenty year on enforcement and policy at the federal antitrust agencies. The article explains the differences in antitrust ideologies and their impact on policy preferences. The article then uses a database of civil non-merger complaints by the DOJ and FTC over the last three Presidential administrations to analyze changes in the number, type and other characteristics of antitrust enforcement. It also discusses change in vertical merger enforcement and other antirust policies such as amicus briefs, reports and guidelines. The article concludes that elections do matter and that the impact of elections on the DOJ and FTC has differed significantly