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The impact of competition on productive efficiency in European railways

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  • Gertjan Driessen
  • Mark Lijesen
  • Machiel Mulder

Abstract

This paper empirically explores the relationship between competition design and productive efficiency in the railway industry. We use Data Envelopment Analysis (DEA) to construct efficiency scores, and explain these scores, using variables reflecting institutional factors and competition design. Our results suggest that competitive tendering improves productive efficiency, which is in line with economic intuition as well as with expectations on the design of competition. We also find that free entry lowers productive efficiency. A possible explanation for this result is that free entry may disable railway operators to reap economies of density. Our final result is that more autonomy of management lowers productive efficiency. Most of the incumbent railway companies are state owned and do not face any competitive pressure. As a consequence, increased independence without sufficient competition and adequate regulation may deteriorate incentives for productive efficiency.

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Bibliographic Info

Paper provided by CPB Netherlands Bureau for Economic Policy Analysis in its series CPB Discussion Paper with number 71.

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Date of creation: Oct 2006
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Handle: RePEc:cpb:discus:71

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  1. De Fraja, Giovanni, 1991. "Efficiency and Privatisation in Imperfectly Competitive Industries," Journal of Industrial Economics, Wiley Blackwell, vol. 39(3), pages 311-21, March.
  2. Disney, Richard F & Haskel, Jonathan & Heden, Ylva, 2000. "Restructuring And Productivity Growth In UK Manufacturing," CEPR Discussion Papers 2463, C.E.P.R. Discussion Papers.
  3. Friebel, Guido & Ivaldi, Marc & Vibes, Catherine, 2003. "Railway (De) Regulation : A European Efficiency Comparison," IDEI Working Papers 221, Institut d'Économie Industrielle (IDEI), Toulouse, revised 2007.
  4. Jovanovic, Boyan, 1982. "Selection and the Evolution of Industry," Econometrica, Econometric Society, vol. 50(3), pages 649-70, May.
  5. Fumitoshi Mizutani & Kiyoshi Nakamura, 2004. "The Japanese Experience with Railway Restructuring," NBER Chapters, in: Governance, Regulation, and Privatization in the Asia-Pacific Region, NBER East Asia Seminar on Economics, Volume 12, pages 305-342 National Bureau of Economic Research, Inc.
  6. Mehdi Farsi & Massimo Filippini & William Greene, 2004. "Efficiency Measurement in Network Industries: Application to the Swiss Railway Companies," CEPE Working paper series 04-32, CEPE Center for Energy Policy and Economics, ETH Zurich.
  7. Gathon, H. -J. & Pestieau, P., 1995. "Decomposing efficiency into its managerial and its regulatory components: The case of European railways," European Journal of Operational Research, Elsevier, vol. 80(3), pages 500-507, February.
  8. Cantos, Pedro & Maudos, Joaqui­n, 2001. "Regulation and efficiency: the case of European railways," Transportation Research Part A: Policy and Practice, Elsevier, vol. 35(5), pages 459-472, June.
  9. Pedro Cantos & José Pastor & Lorenzo Serrano, 1999. "Productivity, efficiency and technical change in the European railways: A non-parametric approach," Transportation, Springer, vol. 26(4), pages 337-357, November.
  10. George S Olley & Ariel Pakes, 1992. "The Dynamics Of Productivity In The Telecommunications Equipment Industry," Working Papers 92-2, Center for Economic Studies, U.S. Census Bureau.
  11. Melville L. McMillan & Debasish Datta, 1998. "The Relative Efficiencies of Canadian Universities: A DEA Perspective," Canadian Public Policy, University of Toronto Press, vol. 24(4), pages 485-511, December.
  12. Caves, Douglas W & Christensen, Laurits R, 1980. "The Relative Efficiency of Public and Private Firms in a Competitive Environment: The Case of Canadian Railroads," Journal of Political Economy, University of Chicago Press, vol. 88(5), pages 958-76, October.
  13. John Vickers & George Yarrow, 1991. "Economic Perspectives on Privatization," Journal of Economic Perspectives, American Economic Association, vol. 5(2), pages 111-132, Spring.
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Cited by:
  1. Mette Asmild & Torben Holvad & Jens Hougaard & Dorte Kronborg, 2009. "Railway reforms: do they influence operating efficiency?," Transportation, Springer, vol. 36(5), pages 617-638, September.
  2. Viktoria Kocsis & Ruslan Lukach & Bert Minne & Victoria Shestalova & Nick Zubanov & Henry van der Wiel, 2009. "Relation entry, exit and productivity: an overview of recent theoretical and empirical literature," CPB Document 180, CPB Netherlands Bureau for Economic Policy Analysis.
  3. Gwilliam, Ken, 2008. "A review of issues in transit economics," Research in Transportation Economics, Elsevier, vol. 23(1), pages 4-22, January.
  4. Abate, Megersa & Lijesen, Mark & Pels, Eric & Roelevelt, Adriaan, 2013. "The impact of reliability on the productivity of railroad companies," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 51(C), pages 41-49.

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