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

  • Dan Bogart
  • Latika Chaudhary

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)

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/pol.4.1.28
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File URL: http://www.aeaweb.org/aej/pol/data/2010-0178_data.zip
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Article provided by American Economic Association in its journal American Economic Journal: Economic Policy.

Volume (Year): 4 (2012)
Issue (Month): 1 (February)
Pages: 28-57

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Handle: RePEc:aea:aejpol:v:4:y:2012:i:1:p:28-57
Note: DOI: 10.1257/pol.4.1.28
Contact details of provider: Web page: https://www.aeaweb.org/aej-policy
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  1. Antonio Estache & L. Wren-Lewis, 2009. "Towards a Theory of Regulation for Developing Countries: Following Jean-Jacques Laffont's Lead," ULB Institutional Repository 2013/43903, ULB -- Universite Libre de Bruxelles.
  2. Andrabi, Tahir & Kuehlwein, Michael, 2010. "Railways and Price Convergence in British India," The Journal of Economic History, Cambridge University Press, vol. 70(02), pages 351-377, June.
  3. Estrin, Saul & Hanousek, Jan & Kocenda, Evzen & Svejnar, Jan, 2009. "Effects of privatization and ownership in transition economies," Policy Research Working Paper Series 4811, The World Bank.
  4. Chaudhary, Latika, 2009. "Determinants of Primary Schooling in British India," The Journal of Economic History, Cambridge University Press, vol. 69(01), pages 269-302, March.
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