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Railway Finance in Europe

Author

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  • Nash Chris

    (Institute for Transport Studies, University of Leeds, Leeds, United Kingdom of Great Britain and Northern Ireland)

Abstract

Governments make substantial contributions to the finance of railways in Europe. This paper first considers the possible justifications for subsidies – namely normalisation of accounts, public service obligations, economies of density, relief of externalities on other modes, wider economic benefits and option values. It then considers the alternative ways of giving subsidies in the form of contributions to infrastructure costs, investment grants and subsidies to services. It concludes that there are good reasons for subsidising railways – in particular a first best argument for subsidising infrastructure will usually exist and a failure to do so will lead to fewer services being operated than are economically justified – but there is a need to ensure subsidies are used efficiently. Ways of achieving this include the setting of clear objectives and financial constraints, decentralisation of decision taking to focussed sector management, regulation and benchmarking of infrastructure costs and the introduction of competition for and in the market. Together these should reduce or eliminate the link between subsidies and inefficiency observed in earlier times.

Suggested Citation

  • Nash Chris, 2017. "Railway Finance in Europe," Review of Network Economics, De Gruyter, vol. 16(2), pages 67-88, June.
  • Handle: RePEc:bpj:rneart:v:16:y:2017:i:2:p:67-88:n:3
    DOI: 10.1515/rne-2017-0039
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    References listed on IDEAS

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    1. Andrew S. J. Smith & Christopher Nash, 2014. "Rail Efficiency: Cost Research and its Implications for Policy," International Transport Forum Discussion Papers 2014/22, OECD Publishing.
    2. Chris Nash & Jan-Eric Nilsson & Heike Link, 2013. "Comparing Three Models for Introduction of Competition into Railways," Journal of Transport Economics and Policy, University of Bath, vol. 47(2), pages 191-206, May.
    3. Pittman Russell, 2017. "The Underappreciated Connection between Rail Restructuring Strategies and Financing," Review of Network Economics, De Gruyter, vol. 16(2), pages 161-169, June.
    4. Daniel J. Graham, 2007. "Agglomeration, Productivity and Transport Investment," Journal of Transport Economics and Policy, University of Bath, vol. 41(3), pages 317-343, September.
    5. Johnson Daniel & Nash Chris, 2008. "Charging for Scarce Rail Capacity in Britain: A Case Study," Review of Network Economics, De Gruyter, vol. 7(1), pages 1-24, March.
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    Cited by:

    1. Pittman, Russell & Jandova, Monika & Krol, Marcin & Nekrasenko, Larysa & Paleta, Tomas, 2019. "The Effectiveness of EC Policies to Move Freight from Road to Rail: Evidence from CEE Grain Markets," MPRA Paper 97571, University Library of Munich, Germany.

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    Keywords

    Europe; finance; rail;
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