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

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  • Dan Bogart
  • Latika Chaudhary

Abstract

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)

Suggested Citation

  • Dan Bogart & Latika Chaudhary, 2012. "Regulation, Ownership, and Costs: A Historical Perspective from Indian Railways," American Economic Journal: Economic Policy, American Economic Association, vol. 4(1), pages 28-57, February.
  • Handle: RePEc:aea:aejpol:v:4:y:2012:i:1:p:28-57
    Note: DOI: 10.1257/pol.4.1.28
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    References listed on IDEAS

    as
    1. J. David Brown & John S. Earle & Almos Telegdy, 2006. "The Productivity Effects of Privatization: Longitudinal Estimates from Hungary, Romania, Russia, and Ukraine," Journal of Political Economy, University of Chicago Press, vol. 114(1), pages 61-99, February.
    2. Emmanuelle Auriol & Pierre M. Picard, 2008. "Infrastructure and Public Utilities Privatization in Developing Countries," World Bank Economic Review, World Bank Group, vol. 23(1), pages 77-100, November.
    3. Antonio Estache & Liam Wren-Lewis, 2009. "Toward a Theory of Regulation for Developing Countries: Following Jean-Jacques Laffont's Lead," Journal of Economic Literature, American Economic Association, vol. 47(3), pages 729-770, September.
    4. Saul Estrin & Jan Hanousek & Evzen Kocenda & Jan Svejnar, 2009. "The Effects of Privatization and Ownership in Transition Economies," Journal of Economic Literature, American Economic Association, vol. 47(3), pages 699-728, September.
    5. 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.
    6. Dan Bogart & Latika Chaudhary, 2012. "Regulation, Ownership, and Costs: A Historical Perspective from Indian Railways," American Economic Journal: Economic Policy, American Economic Association, vol. 4(1), pages 28-57, February.
    7. 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.
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    Cited by:

    1. Dan Bogart & Latika Chaudhary & Alfonso Herranz-Loncan, 2015. "The Growth Contribution of Colonial Indian Railways in Comparative Perspective," CEH Discussion Papers 033, Centre for Economic History, Research School of Economics, Australian National University.
    2. Dan Bogart & Latika Chaudhary, 2012. "Regulation, Ownership, and Costs: A Historical Perspective from Indian Railways," American Economic Journal: Economic Policy, American Economic Association, vol. 4(1), pages 28-57, February.
    3. Bogart, Dan & Chaudhary, Latika, 2015. "Off the rails: Is state ownership bad for productivity?," Journal of Comparative Economics, Elsevier, vol. 43(4), pages 997-1013.
    4. Ran Abramitzky, 2015. "Economics and the Modern Economic Historian," NBER Working Papers 21636, National Bureau of Economic Research, Inc.

    More about this item

    JEL classification:

    • L32 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Public Enterprises; Public-Private Enterprises
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L92 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Railroads and Other Surface Transportation
    • N45 - Economic History - - Government, War, Law, International Relations, and Regulation - - - Asia including Middle East
    • N75 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services - - - Asia including Middle East
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • R41 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Transportation: Demand, Supply, and Congestion; Travel Time; Safety and Accidents; Transportation Noise

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    1. Regulation, Ownership, and Costs: A Historical Perspective from Indian Railways (AEJ:EP 2012) in ReplicationWiki

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