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Does vertical separation reduce cost? An empirical analysis of the rail industry in European and East Asian OECD Countries

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  • Fumitoshi Mizutani

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  • Shuji Uranishi

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Abstract

The main purpose of this study is to analyze structural separation policies, especially vertical (i.e. operation-infrastructure) and horizontal (i.e. passenger-freight service) separation. Using the total cost function of a railway organization, we evaluate whether or not vertical separation and/or horizontal separation can reduce costs. For this analysis, we selected 30 railway organizations in 23 European and East Asian OECD countries over 14 years, from 1994 to 2007. Our findings show that horizontal separation reduces railway cost. As for vertical separation, effects change according to the train density of a railway organization. With lower train density, vertical separation tends to reduce cost, while with higher train density vertical separation increases cost. Copyright Springer Science+Business Media, LLC 2013

Suggested Citation

  • Fumitoshi Mizutani & Shuji Uranishi, 2013. "Does vertical separation reduce cost? An empirical analysis of the rail industry in European and East Asian OECD Countries," Journal of Regulatory Economics, Springer, vol. 43(1), pages 31-59, January.
  • Handle: RePEc:kap:regeco:v:43:y:2013:i:1:p:31-59
    DOI: 10.1007/s11149-012-9193-4
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    References listed on IDEAS

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    Cited by:

    1. Arrigo, Ugo & Di Foggia, Giacomo, 2013. "Assessing the railways subsidy in selected European countries: insights from the Italian case," MPRA Paper 67830, University Library of Munich, Germany.
    2. Frank Miram, 2012. "Anforderungen an die konsistente Regulierung der Eisenbahnen," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 81(1), pages 149-165.
    3. Pittman, Russell, 2016. "Reforming and Restructuring Ukrzaliznytsia: A Crucial Task for Ukrainian Reformers," MPRA Paper 76028, University Library of Munich, Germany.
    4. repec:eee:trapol:v:60:y:2017:i:c:p:143-151 is not listed on IDEAS
    5. Fumitoshi Mizutani & Andrew Smith & Chris Nash & Shuji Uranishi, 2015. "Comparing the Costs of Vertical Separation, Integration, and Intermediate Organisational Structures in European and East Asian Railways," Journal of Transport Economics and Policy, University of Bath, vol. 49(3), pages 496-515, July.
    6. David Hergott & Florent Laroche & Patricia Perennes, 2014. "30 fiches pour comprendre les enjeux de la réforme ferroviaire," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-01486732, HAL.
    7. Preston, John & Robins, Dawn, 2013. "Evaluating the long term impacts of transport policy: The case of passenger rail privatisation," Research in Transportation Economics, Elsevier, vol. 39(1), pages 14-20.
    8. Merkert, Rico & Hensher, David A., 2014. "Open access for railways and transaction cost economics – Management perspectives of Australia's rail companies," Research in Transportation Economics, Elsevier, vol. 48(C), pages 227-236.
    9. Noriaki Matsushima & Fumitoshi Mizutani, 2014. "How Does Market Size Affect Vertical Structure When Considering Vertical Coordination? Application to the Railway Industry," Pacific Economic Review, Wiley Blackwell, vol. 19(5), pages 657-676, December.
    10. M. Finger & A. Haller & S. Strube Martins & U. Trinkner, 2014. "Integrated Timetables for Railway Passenger Transport Services," Competition and Regulation in Network Industries, Intersentia, vol. 15(1), pages 78-107, March.
    11. Massimo Geloso Grosso & Hildegunn Kyvik Nordås & Asako Ueno & Frederic Gonzales & Iza Lejárraga & Sébastien Miroudot & Dorothée Rouzet, 2014. "Services Trade Restrictiveness Index (STRI): Transport and Courier Services," OECD Trade Policy Papers 176, OECD Publishing.
    12. José A. Gómez-Ibáñez, 2016. "Open Access to Infrastructure Networks: The Experience of Railroads," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 49(2), pages 311-345, September.
    13. Friebel, Guido & Ivaldi, Marc & Pouyet, Jérôme, 2011. "Separation versus Integration in International Rail Markets: A Theoretical Investigation," TSE Working Papers 11-248, Toulouse School of Economics (TSE), revised Mar 2013.
    14. Nash, Chris A. & Smith, Andrew S.J. & van de Velde, Didier & Mizutani, Fumitoshi & Uranishi, Shuji, 2014. "Structural reforms in the railways: Incentive misalignment and cost implications," Research in Transportation Economics, Elsevier, vol. 48(C), pages 16-23.
    15. Matthias Finger & Pierre Messulam (ed.), 2015. "Rail Economics, Policy and Regulation in Europe," Books, Edward Elgar Publishing, number 15711.
    16. repec:eee:transa:v:105:y:2017:i:c:p:106-122 is not listed on IDEAS
    17. Arrigo, Ugo & Di Foggia, Giacomo, 2013. "Schemes and levels of state aid to rail industry in Europe: evidences from a cross-country comparison," MPRA Paper 67829, University Library of Munich, Germany.
    18. Pittman, Russell & Choi, Sunghee, 2013. "The Economics of Railways Restructuring in South Korea," MPRA Paper 44992, University Library of Munich, Germany.

    More about this item

    Keywords

    Vertical separation; Horizontal separation; Total cost function; Railway; L23; L33; L51; L92; R48;

    JEL classification:

    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L92 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Railroads and Other Surface Transportation
    • R48 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government Pricing and Policy

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