Alternative Methods for Estimating State Welfare Gains from Economic Deregulation of Intrastate Motor Freight Carriage: A Comparison of Results

Abstract

Abstract Prior to the deregulation of intrastate motor carriage in 1995, several studies estimated the expected gains of deregulation predicated on the rate decreases that had occurred following interstate deregulation in 1980. One complex study used the “price” model of a multi-regional input-output model (linking forty-eight state level input-output models) to estimate Posner welfare trapezoids and Harberger welfare triangles. Herein, a much simpler model to capture the welfare effects is presented. While lacking the interdependencies of input-output, the simpler model captures the first order effects of the rate decreases. Comparing the results of the two methods yields roughly the same results ($2.5 billion/year welfare trapezoids for twenty strongly regulated states) in the aggregate. Given the simple model's ability to replicate the results of the more complex model, the simple model is then used to estimate the welfare gains using intrastate flow volumes from 1993 and from 1995 rate decrease estimates collected anecdotally from shippers, carriers, state motor freight associations, residual state regulatory agencies, rate bureaus, freight rate auditors, and other professional and government organizations and agencies. The results indicate a welfare trapezoid benefit of intrastate motor carrier deregulation of $2.34 billion (in 1995 dollars).