Regulatory reform and freight mode choice

Abstract

Reform of trucking Vehicle Weights and Dimensions (VWD) regulations inCanada is now underway. The effect these reforms will have on the freight transportation industry are only recently the subject of research. This paper is part of this new research effort, aimed at understanding how regulatory reform in the trucking sector will affect the existing competitive relationship between trucks and the railways. The paper presents the results of study and research into modelling the relationship between mode choice and the service characteristics that are affected by VWD reform.Using several periods of data, a series of econometric models are developed which help to elucidate the relative relationships between the mode service characteristics for both of the principal interprovincial freight modes. A technique is developed and presented to model railway user costs in order to overcome the complex and often unrepresentable pricing activities of Canadian railways.The strength of the developed econometric models is presented, including their significance and statistical reliability. This is further reinforced by the similarities exhibited by all the models in the series. The selected model is applied to predict market service responses required of the railway industry in order to compete with the trucking sector now adapting to the new regulations.The impact of the newly implemented vehicle weight and dimension reform on the rail transportation industry is analyzed and railway industry improvements aimed at maintaining its market share are presented. The results predicted by the model show that railway user cost reductions should be moderate, and likely less than the level of inflation over the period of time when trucking converts its fleet to take advantage of the new regulations.