IDEAS home Printed from https://ideas.repec.org/a/eee/transb/v138y2020icp292-316.html
   My bibliography  Save this article

Understanding the costs of urban rail transport operations

Author

Listed:
  • Anupriya,
  • Graham, Daniel J.
  • Carbo, Jose M.
  • Anderson, Richard J.
  • Bansal, Prateek

Abstract

There is considerable variation in the average cost of operations across urban rail transport (or metro) systems. Since metros are typically owned and operated by public authorities, there is a public interest case in understanding the key drivers of their operational costs. This paper estimates short-run cost functions for metro operations using a unique panel dataset from twenty-four metro systems around the world. We use a flexible translog specification and apply dynamic panel generalised method of moments (DPGMM) estimation to control for confounding from observed and unobserved characteristics of metro operations. Our empirical results show that metro systems with a high density of usage are the most cost-efficient. We also find that operational costs fall as metro size increases. These results have important implications for the economic appraisal of metro systems.

Suggested Citation

  • Anupriya, & Graham, Daniel J. & Carbo, Jose M. & Anderson, Richard J. & Bansal, Prateek, 2020. "Understanding the costs of urban rail transport operations," Transportation Research Part B: Methodological, Elsevier, vol. 138(C), pages 292-316.
    • Handle: RePEc:eee:transb:v:138:y:2020:i:c:p:292-316
    DOI: 10.1016/j.trb.2020.05.019
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0191261520303416
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.trb.2020.05.019?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Kazuo Ogawa, 2011. "Why Are Concavity Conditions Not Satisfied in the Cost Function? The Case of Japanese Manufacturing Firms during the Bubble Period," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 73(4), pages 556-580, August.
    2. Wenbin Wei & Mark Hansen, 2003. "Cost Economics of Aircraft Size," Journal of Transport Economics and Policy, University of Bath, vol. 37(2), pages 279-296, May.
    3. McFadden, Daniel, 1978. "Cost, Revenue, and Profit Functions," Histoy of Economic Thought Chapters, in: Fuss, Melvyn & McFadden, Daniel (ed.),Production Economics: A Dual Approach to Theory and Applications, volume 1, chapter 1, McMaster University Archive for the History of Economic Thought.
    4. André de Palma & Robin Lindsey & Emile Quinet & Roger Vickerman (ed.), 2011. "A Handbook of Transport Economics," Books, Edward Elgar Publishing, number 12679.
    5. Jan De Loecker, 2011. "Product Differentiation, Multiproduct Firms, and Estimating the Impact of Trade Liberalization on Productivity," Econometrica, Econometric Society, vol. 79(5), pages 1407-1451, September.
    6. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July.
    7. Leonardo Basso & Sergio Jara-Díaz, 2006. "Distinguishing Multiproduct Economies of Scale from Economies of Density on a Fixed-Size Transport Network," Networks and Spatial Economics, Springer, vol. 6(2), pages 149-162, June.
    8. Greene, William H., 1980. "Maximum likelihood estimation of econometric frontier functions," Journal of Econometrics, Elsevier, vol. 13(1), pages 27-56, May.
    9. Philippe Gagnepain & Marc Ivaldi, 2002. "Incentive Regulatory Policies: The Case of Public Transit Systems in France," RAND Journal of Economics, The RAND Corporation, vol. 33(4), pages 605-629, Winter.
    10. Savage, Ian, 1997. "Scale economies in United States rail transit systems," Transportation Research Part A: Policy and Practice, Elsevier, vol. 31(6), pages 459-473, November.
    11. Olley, G Steven & Pakes, Ariel, 1996. "The Dynamics of Productivity in the Telecommunications Equipment Industry," Econometrica, Econometric Society, vol. 64(6), pages 1263-1297, November.
    12. Karlaftis, Matthew G. & McCarthy, Patrick, 2002. "Cost structures of public transit systems: a panel data analysis," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 38(1), pages 1-18, January.
    13. Pindyck, Robert S & Rotemberg, Julio J, 1983. "Dynamic Factor Demands and the Effects of Energy Price Shocks," American Economic Review, American Economic Association, vol. 73(5), pages 1066-1079, December.
    14. Fuss, Melvyn & McFadden, Daniel (ed.), 1978. "Production Economics: A Dual Approach to Theory and Applications," Elsevier Monographs, Elsevier, edition 1, number 9780444850133.
    15. Caves, Douglas W & Christensen, Laurits R & Swanson, Joseph A, 1981. "Productivity Growth, Scale Economies, and Capacity Utilization in U.S. Railroads, 1955-74," American Economic Review, American Economic Association, vol. 71(5), pages 994-1002, December.
    16. Ackerberg, Daniel & Lanier Benkard, C. & Berry, Steven & Pakes, Ariel, 2007. "Econometric Tools for Analyzing Market Outcomes," Handbook of Econometrics, in: J.J. Heckman & E.E. Leamer (ed.), Handbook of Econometrics, edition 1, volume 6, chapter 63, Elsevier.
    17. Richard Blundell & Stephen Bond, 2000. "GMM Estimation with persistent panel data: an application to production functions," Econometric Reviews, Taylor & Francis Journals, vol. 19(3), pages 321-340.
    18. Leonardo J. Basso & Sergio R. Jara-Díaz, 2005. "Calculation of Economies of Spatial Scope from Transport Cost Functions with Aggregate Output with an Application to the Airline Industry," Journal of Transport Economics and Policy, University of Bath, vol. 39(1), pages 25-52, January.
    19. Keeler, Theodore E, 1974. "Railroad Costs, Returns to Scale, and Excess Capacity," The Review of Economics and Statistics, MIT Press, vol. 56(2), pages 201-208, May.
    20. Leonardo J. Basso & Sergio R. Jara-Díaz & William G. Waters, 2011. "Cost Functions for Transport Firms," Chapters, in: André de Palma & Robin Lindsey & Emile Quinet & Roger Vickerman (ed.), A Handbook of Transport Economics, chapter 12, Edward Elgar Publishing.
    21. Viton, Philip A, 1981. "A Translog Cost Function for Urban Bus Transit," Journal of Industrial Economics, Wiley Blackwell, vol. 29(3), pages 287-304, March.
    22. Fumitoshi Mizutani, 2004. "Privately Owned Railways' Cost Function, Organization Size and Ownership," Journal of Regulatory Economics, Springer, vol. 25(3), pages 297-322, May.
    23. André de Palma & Robin Lindsey & Emile Quinet & Robert Vickerman, 2011. "Handbook Of Transport Economics," PSE-Ecole d'économie de Paris (Postprint) halshs-00754912, HAL.
    24. James Levinsohn & Amil Petrin, 2003. "Estimating Production Functions Using Inputs to Control for Unobservables," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 70(2), pages 317-341.
    25. Mehdi Farsi & Massimo Filippini & William Greene, 2005. "Efficiency Measurement in Network Industries: Application to the Swiss Railway Companies," Journal of Regulatory Economics, Springer, vol. 28(1), pages 69-90, July.
    26. John D. Bitzan, 2003. "Railroad Costs and Competition: The Implications of Introducing Competition to Railroad Networks," Journal of Transport Economics and Policy, University of Bath, vol. 37(2), pages 201-225, May.
    27. Graham, Daniel J., 2008. "Productivity and efficiency in urban railways: Parametric and non-parametric estimates," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 44(1), pages 84-99, January.
    28. Wooldridge, Jeffrey M., 2009. "On estimating firm-level production functions using proxy variables to control for unobservables," Economics Letters, Elsevier, vol. 104(3), pages 112-114, September.
    29. Batarce, Marco & Galilea, Patricia, 2018. "Cost and fare estimation for the bus transit system of Santiago," Transport Policy, Elsevier, vol. 64(C), pages 92-101.
    30. Katayama, Hajime & Lu, Shihua & Tybout, James R., 2009. "Firm-level productivity studies: Illusions and a solution," International Journal of Industrial Organization, Elsevier, vol. 27(3), pages 403-413, May.
    31. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(2), pages 277-297.
    32. Graham, Daniel J. & Couto, Antonio & Adeney, William E. & Glaister, Stephen, 2003. "Economies of scale and density in urban rail transport: effects on productivity," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 39(6), pages 443-458, November.
    33. Batarce, Marco, 2016. "Estimation of urban bus transit marginal cost without cost data," Transportation Research Part B: Methodological, Elsevier, vol. 90(C), pages 241-262.
    34. Ryan, David L. & Wales, Terence J., 2000. "Imposing local concavity in the translog and generalized Leontief cost functions," Economics Letters, Elsevier, vol. 67(3), pages 253-260, June.
    35. Ivaldi, Marc & McCullough, Gerard, 2007. "Railroad Pricing and Revenue-to-Cost Margins in the Post-Staggers Era," Research in Transportation Economics, Elsevier, vol. 20(1), pages 153-178, January.
    36. Bitzan, John, 2000. "Railroad Cost Conditions: Implications for Policy," UGPTI Department Publication 231804, North Dakota State University, Upper Great Plains Transportation Institute.
    37. Ríos-Rull, José-Víctor & Santaeulàlia-Llopis, Raül, 2010. "Redistributive shocks and productivity shocks," Journal of Monetary Economics, Elsevier, vol. 57(8), pages 931-948, November.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Abel Brodeur & David Gray & Anik Islam & Suraiya Bhuiyan, 2021. "A literature review of the economics of COVID‐19," Journal of Economic Surveys, Wiley Blackwell, vol. 35(4), pages 1007-1044, September.
    2. Hörcher, Daniel & Tirachini, Alejandro, 2021. "A review of public transport economics," Economics of Transportation, Elsevier, vol. 25(C).
    3. Prakash, Navendu & Srivastava, Bhavya & Singh, Shveta & Sharma, Seema & Jain, Sonali, 2022. "Effectiveness of social distancing interventions in containing COVID-19 incidence: International evidence using Kalman filter," Economics & Human Biology, Elsevier, vol. 44(C).
    4. Li, Yufan & Teng, Weichen & Tsai, Limin & Lin, Tom M.Y., 2022. "Does English proficiency support the economic development of non-English-speaking countries? The case of Asia," International Journal of Educational Development, Elsevier, vol. 92(C).
    5. Chang, Shuhua & Li, Anqi & Wang, Xin & Wang, Xinyu, 2022. "Joint optimization of e-commerce supply chain financing strategy and channel contract," European Journal of Operational Research, Elsevier, vol. 303(2), pages 908-927.
    6. Xuto, Praj & Anderson, Richard J. & Graham, Daniel J. & Hörcher, Daniel, 2021. "Optimal infrastructure reinvestment in urban rail systems: A dynamic supply optimisation approach," Transportation Research Part A: Policy and Practice, Elsevier, vol. 147(C), pages 251-268.
    7. Mudassir Ahmad & Izza Anwer & Muhammad Irfan Yousuf & Muhammad Ashraf Javid & Nazam Ali & Giovanni Tesoriere & Tiziana Campisi, 2024. "Investigating the Key Factors Affecting Public Transport Ridership in Developing Countries through Structural Equation Modeling," Sustainability, MDPI, vol. 16(11), pages 1-25, May.
    8. Dai, Lei & Jing, Danyue & Hu, Hao & Wang, Zhaojing, 2021. "An environmental and techno-economic analysis of transporting LNG via Arctic route," Transportation Research Part A: Policy and Practice, Elsevier, vol. 146(C), pages 56-71.
    9. Pei Yin & Miaojuan Peng, 2023. "Station Layout Optimization and Route Selection of Urban Rail Transit Planning: A Case Study of Shanghai Pudong International Airport," Mathematics, MDPI, vol. 11(6), pages 1-29, March.
    10. Anupriya, & Bansal, Prateek & Graham, Daniel J., 2023. "Congestion in cities: Can road capacity expansions provide a solution?," Transportation Research Part A: Policy and Practice, Elsevier, vol. 174(C).
    11. Saifur Rahman Chowdhury & Tachlima Chowdhury Sunna & Shakil Ahmed, 2021. "Telemedicine is an important aspect of healthcare services amid COVID‐19 outbreak: Its barriers in Bangladesh and strategies to overcome," International Journal of Health Planning and Management, Wiley Blackwell, vol. 36(1), pages 4-12, January.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Leonardo J. Basso & Sergio R. Jara-Díaz & William G. Waters, 2011. "Cost Functions for Transport Firms," Chapters, in: André de Palma & Robin Lindsey & Emile Quinet & Roger Vickerman (ed.), A Handbook of Transport Economics, chapter 12, Edward Elgar Publishing.
    2. Dobbelaere, Sabien & Kiyota, Kozo & Mairesse, Jacques, 2015. "Product and labor market imperfections and scale economies: Micro-evidence on France, Japan and the Netherlands," Journal of Comparative Economics, Elsevier, vol. 43(2), pages 290-322.
    3. Amoroso, S., 2013. "Heterogeneity of innovative, collaborative, and productive firm-level processes," Other publications TiSEM f5784a49-7053-401d-855d-1, Tilburg University, School of Economics and Management.
    4. Jan De Loecker & Frederic Warzynski, 2012. "Markups and Firm-Level Export Status," American Economic Review, American Economic Association, vol. 102(6), pages 2437-2471, October.
    5. Grieco, Paul & Pinkse, Joris & Slade, Margaret, 2018. "Brewed in North America: Mergers, marginal costs, and efficiency," International Journal of Industrial Organization, Elsevier, vol. 59(C), pages 24-65.
    6. Jamil, Nida & Chaudhry, Theresa Thompson & Chaudhry, Azam, 2022. "Trading textiles along the new silk route: The impact on Pakistani firms of gaining market access to China," Journal of Development Economics, Elsevier, vol. 158(C).
    7. Daniel A. Ackerberg & Kevin Caves & Garth Frazer, 2015. "Identification Properties of Recent Production Function Estimators," Econometrica, Econometric Society, vol. 83, pages 2411-2451, November.
    8. repec:wsr:wpaper:y:2016:i:165 is not listed on IDEAS
    9. Sara Amoroso & Bertrand Melenberg & Joseph Plasmans & Mark Vancauteren, 2015. "Productivity, Price- and Wage-Markups: An Empirical Analysis of the Dutch Manufacturing Industry," CESifo Working Paper Series 5273, CESifo.
    10. Sergey Lychagin & Joris Pinkse & Margaret E. Slade & John Van Reenen, 2016. "Spillovers in Space: Does Geography Matter?," Journal of Industrial Economics, Wiley Blackwell, vol. 64(2), pages 295-335, June.
    11. Batarce, Marco, 2016. "Estimation of urban bus transit marginal cost without cost data," Transportation Research Part B: Methodological, Elsevier, vol. 90(C), pages 241-262.
    12. Simon Pröll & Giannis Karagiannis & Klaus Salhofer, 2019. "Advertising and Markups: The Case of the German Brewing Industry," Working Papers 732019, University of Natural Resources and Life Sciences, Vienna, Department of Economics and Social Sciences, Institute for Sustainable Economic Development.
    13. Victor Aguirregabiria & Margaret Slade, 2017. "Empirical models of firms and industries," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 50(5), pages 1445-1488, December.
    14. Hörcher, Daniel & Tirachini, Alejandro, 2021. "A review of public transport economics," Economics of Transportation, Elsevier, vol. 25(C).
    15. Bruno Merlevede & Angelos Theodorakopoulos, 2018. "Productivity Effects of Internationalisation Through the Domestic Supply Chain: Evidence from Europe," Working Papers of VIVES - Research Centre for Regional Economics 627689, KU Leuven, Faculty of Economics and Business (FEB), VIVES - Research Centre for Regional Economics.
    16. repec:zbw:inwedp:732019 is not listed on IDEAS
    17. Fethi AMRI & Rim MOUELHI, 2013. "Productivity Growth And Competition In Tunisian Manufacturing Firms," Region et Developpement, Region et Developpement, LEAD, Universite du Sud - Toulon Var, vol. 37, pages 37-64.
    18. Anna Giunta & Domenico Scalera & Francesco Trivieri & Jeffrey B. Nugent & Mariarosaria Agostino, 2011. "Firm Productivity, Organizational Choice and Global Value Chain," Working Papers 2011R09, Orkestra - Basque Institute of Competitiveness.
    19. Florin Maican & Matilda Orth, 2017. "Productivity Dynamics and the Role of ‘Big-Box’ Entrants in Retailing," Journal of Industrial Economics, Wiley Blackwell, vol. 65(2), pages 397-438, June.
    20. Ji Yong Lee & Allen Featherstone & Rodolfo M. Nayga & Doo Bong Han, 2019. "The Long-Run and Short-Run Effects of Ethanol Production on U.S. Beef Producers," Sustainability, MDPI, vol. 11(6), pages 1-14, March.
    21. Maican, Florin & Orth, Matilda, 2021. "Determinants of economies of scope in retail," International Journal of Industrial Organization, Elsevier, vol. 75(C).
    22. Maican, Florin & Orth, Matilda, 2021. "Entry Regulations and Product Variety in Retail," CEPR Discussion Papers 15992, C.E.P.R. Discussion Papers.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:transb:v:138:y:2020:i:c:p:292-316. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/wps/find/journaldescription.cws_home/548/description#description .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.