A method is presented to decide how to calculate the degree of scale economies from estimated transport cost functions which include aggregate outputs as arguments. It is shown that the cost elasticity of each of these aggregates should be weighted by a factor that depends crucially on the relation between the aggregate and the output vector.
Topic: 18. Economies Of Scale And Scope
The deregulation of the trucking industry in the US began in 1978 and was completed in 1980. This study tests for economies of scale and productive efficiency in the trucking industry. Results indicate constant returns to scale in the trucking industry for both pre- and post-deregulation periods. Gains from mergers are likely to be moderate.
The paper argues that output characteristics are positively correlated with, and influenced by, firm size. When firm size increases, output characteristics also change in a direction that reduces unit costs. Drawing on evidence from the US trucking industry, an appropriate specification indicates that economies of scale may well exist.
This paper reports on the estimation of a cost function using pooled data for major US railroads for the period of 1974-86. Analysis is performed of short and long-run returns to scale, the extent of capital disequilibrium, and the adjustments to capital in the heavily regulated and quasi-regulated environments before and after the passage of the Staggers Act in 1980. It is found that there is considerable overcapitalisation in the rail industry and that this has persisted in spite of the Act.
This paper quantifies the significant economies of scale present in a short haul truckload drayage market through the application of a minimum cost scheduling algorithm to actual shipments. This technique offers an alternative to econometric methods which have led to conflicting conclusions with regard to economies of scale in trucking.
This paper shows that the use of capital stock as an argument in a variable cost function without taking into account the utilisation of the capital stock can bias the estimates. The authors propose an alternative specification. Their application to the Canadian airline industry reveals higher returns to scale than that obtained by conventional specification.
Economies of Scale and Scope in the Motor Carrier Industry. An Analysis of the Cost Functions for Seventeen Large LTL Common Motor Carriers
The largest carriers are shown not to have a cost advantage in terms of overall returns, less than truckload specific returns, and economies of scope. Arguments of domination in the LTL segment by very few large firms based on their cost advantages are probably incorrect.
The model shows economies from increased load factors, aircraft size and stage length, but diseconomies from serving more ports and from more departures. Substantial cost savings should be possible in the Australian domestic airline industry.
Road haulage firms grew larger after denationalisation in 1953. Larger firms have scale economies in vehicle mix.