Deregulation without apology: A truncated survivor analysis of long-run efficiency gains in the U.S. trucking industry

Abstract

Deregulation of the U.S. trucking industry is found to have promoted long-run technical efficiency among less-than-truckload carriers of general commodity freight. It did so by exposing all carriers to competition which caused the very largest group, hauling more than five billion ton-miles annually, to lose output share to smaller carrier groups. Their inability to survive in-full implies that efficiency gains were achieved by reducing the extent of operation under decreasing returns to scale. This conclusion conflicts with other recent findings that deregulation promoted long-run efficiency by creating new ways for all carriers, even the very largest, to achieve economies of scale. The discrepancy in conclusions is significant in that previous findings of continuous scale economies, post-deregulation, leave open the possibility of rising industry concentration with all due repercussions on consumer welfare. A more encouraging outlook emerges from the present survivor analysis which finds the minimum efficient size to be below one billion ton-miles annually. This finding strongly supports a prediction of vigorous competition in the future, at least for this one segment of the trucking industry.