The effect of deregulation on motor carrier firms and drivers

Over the last fifteen years, the United States has experienced a period of unfettered laissez-faire government policies not seen since the Hoover administration. In rapid succession airlines, telecommunication, railroads, trucking, and the savings and loan industries were freed of most government restrictions on operations. Many economists and policy-makers believed fervently that deregulation would bring with it the benefits of free-market competitive prices and increased efficiency. The motor carrier industry provides us with a quasi-natural experiment to study the effects of these regulatory changes. Trucking shares many operating and cost characteristics with other deregulated industries, most notably airlines and railroads. This dissertation seeks to accomplish two related tasks. First, it examines the response of carrier finns to changes in regulatory policy. Second, it investigates the effects of regulation and subsequent deregulation on the wage premium earned by union drivers. Following a review of the regulatory history of the motor carrier industry in the first chapter, the second chapter concludes that among a sample of individual carriers deregulation has not changed the cost structure of established firms. There is limited evidence of economies of scale for some carriers, but this is not a result of deregulation. Firms have responded to deregulation by limiting their output mix and specializing in smaller sized break-bulk shipments. The third chapter finds that after accounting for unmeasured selectivity, deregulation appears to have increased the union premium on the order of 65 percentage points above the level earned during regulation. This is consistent with high-ability drivers fleeing the union sector and with a union strategy of maintaining high wage premiums at the expense of employment. Trucking deregulation has reduced carrier rates and has saved shippers money, but has not involved a fundamental restructuring of either industry cost structure or labor bargaining strategies. While the industry has experienced increasing concentration among firms in its major sector, this concentration does not appear to conflict with competitive behavior. Further, the Teamster\u27s union has not radically changed its bargaining position in the face of declining membership among drivers, continuing to focus on high wages and benefits