Patterns of restructuring: The US class 1 railroads from 1984 to 2004

We investigate the restructuring of the US freight railroad industry after its deregulation. An econometric analysis of the joint effects of 'defensive' and 'strategic restructuring' reveals that, unsurprisingly, downsizing of the physical network has affected financial performance positively. Contrary to widely held beliefs, employment reductions by themselves do not explain improved performance, but controlling for interactions of network reductions and labour downsizing with strategic restructuring measures, employment reductions have a strong positive effect. This suggests a positive revision of the Draconian view that the successful restructuring of the US rail industry is mainly the result of workforce reductions.