Firm-Level Total Factor Productivity Growth : Canadian Freight Railways, 1986-2009

Summary: Canadian railways are a vital part of the country’s transportation sector, moving goods and people across the country. We perform firm-level productivity analysis of canadian freight railways for 1986 to 2009, focusing on the two railways which dominate the market: canadian national (cn) and canadian pacific (cp). We obtain total factor productivity (tfp) estimates both by constructing productivity indices and by econometrically estimating cost functions. Driven in part by operational improvements, the strong tfp growth at both firms considerably outpaced aggregate tfp growth in canada over the period of interest. This robust tfp growth, together with significant capital deepening, led to impressive labour productivity gains. We pay special attention to the productivity effects of the 1995 privatization of cn. While cn enjoyed much stronger productivity growth over the 1986-2009 period than cp, its performance was equally superior before and after the 1995 privatization. .