- Economics
We study how federal regulations affect the freight transportation industry in the United States over the last 50 years. In our specification, firms produce ton-miles of transportation from 3 input factors: labor, fuel, and capital. Building on the structural model of regulatory accumulation and investment in productivity developed by Coffey, McLaughlin, and Peretto (2020), firms can invest in improving each individual factor-specific productivity. Using RegData-based counts of regulatory restrictions by industry paired with common public data sources, we estimate the coevolution of labor, fuel, and capital productivity with the accumulation of regulatory restrictions. Regulatory restrictions are associated with lower labor productivity in all four modes, lower fuel productivity in air and rail, and lower capital productivity in air, rail, and water; trucking also shows negative but less precisely estimated effects on fuel and capital. Using our estimates, we perform a different counterfactual simulation for each mode where it experiences a 5 percent increase in regulatory restrictions in 2018. The counterfactuals indicate that such an increase raises unit costs and prices by roughly 0.8–2.3 percent and reduces quantities shipped in the targeted mode by about 1.4–4.1 percent. Because of the growth process, these losses persist and compound over time. Our results provide industry-level microfoundations for the macroeconomic evidence that regulatory accumulation depresses investment, productivity, and output for a crucial economic activity of transporting goods.
