Patterns of Restructuring: The U.S. Class 1 Railroads from 1984 to 2004

31 Pages Posted: 12 Jun 2008

See all articles by Guido Friebel

Guido Friebel

Goethe University Frankfurt; Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics

Gerard J. McCullough

University of Minnesota, Twin Cities - Department of Applied Economics

Laura Padilla Angulo

Universidad Loyola Andalucía

Date Written: May 2008

Abstract

After deregulation in 1980, competitive pressures forced the large U.S. freight railroads to restructure. Much attention has focused on defensive (cost-cutting) restructuring: until 2004 employment was reduced by 60%, and railroads abandoned many of their lines. Less attention has been given to strategic restructuring: many firms changed the skill structure of employment and their output mix. We investigate the effects of defensive and strategic restructuring on financial performance between 1984 and 2004. In a simple regression, line abandonments (reduction of network size) have positive effects on performance but employment reductions do not. Controlling for the interaction between defensive and strategic restructuring, however, changes the picture significantly. Employment reductions then do have positive performance effects. There are also significant complementarities between defensive restructuring and strategic changes in skill and output mix. We provide the first in-depth analysis of the anatomy of restructuring in this important industry. Our analysis re-enforces the view that downsizing works best when accompanied by strategic restructuring.

Keywords: defensive and strategic restructuring, downsizing, labour effects of deregulation, panel data

JEL Classification: J23, L25, L92

Suggested Citation

Friebel, Guido and McCullough, Gerard J. and Padilla Angulo, Laura, Patterns of Restructuring: The U.S. Class 1 Railroads from 1984 to 2004 (May 2008). CEPR Discussion Paper No. DP6836, Available at SSRN: https://ssrn.com/abstract=1143199

Guido Friebel (Contact Author)

Goethe University Frankfurt ( email )

Grüneburgplatz 1
Frankfurt am Main, 60323
Germany

Centre for Economic Policy Research (CEPR)

London
United Kingdom

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Gerard J. McCullough

University of Minnesota, Twin Cities - Department of Applied Economics ( email )

1994 Buford Avenue
St. Paul, MN 55108-1995
United States
612-624-2210 (Phone)

Laura Padilla Angulo

Universidad Loyola Andalucía ( email )

Sevilla, 41000
Spain

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