Analysis of Economies of Size and Density for Short Line Railroads
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Analysis of Economies of Size and Density for Short Line Railroads

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    After the Staggers Rail Act, Class I railroads were allowed more flexibility to sell and abandon sections of rail track. These sections of track were less profitable and had limited density per mile. Much of this track was taken over by rail carriers known as short lines, which have had mixed results, with many of them being viable while others were not. This study examines these short lines to determine what makes them viable and efficient. Previous research studies have not addressed this issue adequately because of the data used and the advancements in techniques that have taken place since. There has not been a recent study on the short line railroad industry that has utilized the Translog Cost Function. Furthermore, the data used in this study were supplied by the short lines through use of the American Short Line Database, which was compiled by the Upper Great Plains Transportation Institute. This study demonstrated that short lines could achieve greater cost savings if they were to increase their density (revenue ton miles per mile) and their size (mile of road). Size is an important criterion that a short line must examine when evaluating the purchase of a new section of track. However, existing railroads may have difficulty increasing their size because of their connections to Class I railroads and limited financial resources. Density is critical to the short line operations, and by increasing their density on the rail, track short lines could decrease their average cost. The cost analysis in this study demonstrates a need of longer hauls and/or larger train configurations for them to remain viable.
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