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Regulation, Ownership, and Costs: A Historical Perspective from Indian Railways

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  • Dan Bogart
  • Latika Chaudhary

Abstract

This paper studies the relationship between operational costs and state ownership in Indian railways between 1874 and 1912. We find the move to state ownership significantly decreased working expenses. The cost declines are not driven by anticipation effects, changes in reporting standards, or long run trends. Rather, the evidence suggests the colonial Government of India reduced operational costs by cutting labor costs. Our surprising results can be explained by the undemocratic colonial nature of the Government of India, a fiscal system heavily reliant on railways for revenues, and a regulatory environment under private ownership that weakened incentives to lower costs. (JEL L32, L51, L92, N45, N75, O18, R41)

Suggested Citation

  • Dan Bogart & Latika Chaudhary, 2012. "Regulation, Ownership, and Costs: A Historical Perspective from Indian Railways," American Economic Journal: Economic Policy, American Economic Association, vol. 4(1), pages 28-57, February.
    • Handle: RePEc:aea:aejpol:v:4:y:2012:i:1:p:28-57
    Note: DOI: 10.1257/pol.4.1.28
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    Cited by:

    1. Sounman Hong, 2016. "When does a public–private partnership (PPP) lead to inefficient cost management? Evidence from South Korea’s urban rail system," Public Money & Management, Taylor & Francis Journals, vol. 36(6), pages 447-454, September.
    2. Dan Bogart & Latika Chaudhary & Alfonso Herranz-Loncan, 2015. "The Growth Contribution of Colonial Indian Railways in Comparative Perspective," CEH Discussion Papers 033, Centre for Economic History, Research School of Economics, Australian National University.
    3. Bogart, Dan, 2022. "Infrastructure and institutions: Lessons from history," Regional Science and Urban Economics, Elsevier, vol. 94(C).
    4. Bogart, Dan & Chaudhary, Latika, 2015. "Off the rails: Is state ownership bad for productivity?," Journal of Comparative Economics, Elsevier, vol. 43(4), pages 997-1013.
    5. Prashant Premkumar & P. N. Ram Kumar, 2019. "Literature Review of Locomotive Assignment Problem from Service Operations Perspective: The Case of Indian Railways," IIM Kozhikode Society & Management Review, , vol. 8(1), pages 74-86, January.
    6. Alfonso Herranz-Loncán & Johan Fourie, 2018. "“For the public benefit”? Railways in the British Cape Colony," European Review of Economic History, European Historical Economics Society, vol. 22(1), pages 73-100.
    7. Chitresh Shrivastva & Stabak Roy & Dhruv Ashok, 2023. "Border Region Railway Development in Sino- Indian Geopolitical Competition," India Quarterly: A Journal of International Affairs, , vol. 79(2), pages 209-222, June.
    8. Ran Abramitzky, 2015. "Economics and the Modern Economic Historian," NBER Working Papers 21636, National Bureau of Economic Research, Inc.

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    More about this item

    JEL classification:

    • L32 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Public Enterprises; Public-Private Enterprises
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L92 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Railroads and Other Surface Transportation
    • N45 - Economic History - - Government, War, Law, International Relations, and Regulation - - - Asia including Middle East
    • N75 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services - - - Asia including Middle East
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • R41 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Transportation: Demand, Supply, and Congestion; Travel Time; Safety and Accidents; Transportation Noise

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    1. Regulation, Ownership, and Costs: A Historical Perspective from Indian Railways (American Economic Journal: Economic Policy 2012) in ReplicationWiki

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