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Does vertical separation reduce cost? An empirical analysis of the rail industry in European and East Asian OECD Countries

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  • Fumitoshi Mizutani
  • Shuji Uranishi

Abstract

The main purpose of this study is to analyze structural separation policies, especially vertical (i.e. operation-infrastructure) and horizontal (i.e. passenger-freight service) separation. Using the total cost function of a railway organization, we evaluate whether or not vertical separation and/or horizontal separation can reduce costs. For this analysis, we selected 30 railway organizations in 23 European and East Asian OECD countries over 14 years, from 1994 to 2007. Our findings show that horizontal separation reduces railway cost. As for vertical separation, effects change according to the train density of a railway organization. With lower train density, vertical separation tends to reduce cost, while with higher train density vertical separation increases cost. Copyright Springer Science+Business Media, LLC 2013

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  • Fumitoshi Mizutani & Shuji Uranishi, 2013. "Does vertical separation reduce cost? An empirical analysis of the rail industry in European and East Asian OECD Countries," Journal of Regulatory Economics, Springer, vol. 43(1), pages 31-59, January.
    • Handle: RePEc:kap:regeco:v:43:y:2013:i:1:p:31-59
    DOI: 10.1007/s11149-012-9193-4
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    More about this item

    Keywords

    Vertical separation; Horizontal separation; Total cost function; Railway; L23; L33; L51; L92; R48;
    All these keywords.

    JEL classification:

    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L92 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Railroads and Other Surface Transportation
    • R48 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government Pricing and Policy

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