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Economies of Scope in European Railways: An Efficiency Analysis

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  • Christian Growitsch

    () (Halle Institute for Economic Research)

  • Heike Wetzel

    () (Energiewirtschaftliches Institut an der Universität zu Köln, Germany)

Abstract

In the course of railway reforms at the end of the last century, European na- tional governments, as well the EU Commission, decided to open markets and to separate railway networks from train operations. Vertically integrated railway com- panies argue that such a separation of infrastructure and operations would diminish the advantages of vertical integration and would therefore not be suitable to raise economic welfare. In this paper, we conduct a pan-European analysis to investi- gate the performance of European railways with a particular focus on economies of scope associated with vertical integration. We test the hypothesis that integrated railways realize economies of joint production and, thus, produce railway services on a higher level of efficiency. To determine whether joint or separate production is more efficient we apply an innovative Data Envelopment Analysis super-efficiency bootstrapping model which relates the efficiency for integrated production to a vir- tual reference set consisting of the separated production technology and which is applicable to other network industries as energy and telecommunication as well. Our findings are that for a majority of European Railway companies economies of scope exist.

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Bibliographic Info

Paper provided by University of Lüneburg, Institute of Economics in its series Working Paper Series in Economics with number 29.

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Length: 25 pages
Date of creation: Jul 2006
Date of revision:
Handle: RePEc:lue:wpaper:29

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Web page: http://leuphana.de/institute/ivwl.html

Related research

Keywords: Efficiency; Vertical Integration; Railway Industry;

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  1. Ivaldi Marc & Mccullough Gerard, 2008. "Subadditivity Tests for Network Separation with an Application to U.S. Railroads," Review of Network Economics, De Gruyter, vol. 7(1), pages 1-13, March.
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  15. Coelli, Tim & Perelman, Sergio, 1999. "A comparison of parametric and non-parametric distance functions: With application to European railways," European Journal of Operational Research, Elsevier, vol. 117(2), pages 326-339, September.
  16. Jamasb, Tooraj & Pollitt, Michael, 2003. "International benchmarking and regulation: an application to European electricity distribution utilities," Energy Policy, Elsevier, vol. 31(15), pages 1609-1622, December.
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Citations

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Cited by:
  1. Russell Pittman, 2009. "Competition Issues in Restructuring Ports and Railways, Including Brief Consideration of these Sectors in India," EAG Discussions Papers 200906, Department of Justice, Antitrust Division.
  2. Pittman, Russell, 2011. "Risk-averse restructuring of freight railways in China," Utilities Policy, Elsevier, vol. 19(3), pages 152-160.
  3. Russell Pittman, 2009. "Railway Mergers and Railway Alliances: Competition Issues and Lessons for Other Network Industries," EAG Discussions Papers 200902, Department of Justice, Antitrust Division.
  4. Russell Pittman, 2007. "Make or buy on the Russian railway? Coase, Williamson, and Tsar Nicholas II," Economic Change and Restructuring, Springer, vol. 40(3), pages 207-221, September.
  5. Krol, Marcin, 2009. "Benefits and Costs of vertical Separation in Network Industries. The Case of Railway Transport in the European Environment," MPRA Paper 23815, University Library of Munich, Germany.

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