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Comparing the Costs of Vertical Separation, Integration, and Intermediate Organisational Structures in European and East Asian Railways

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  • Fumitoshi Mizutani
  • Andrew Smith
  • Chris Nash
  • Shuji Uranishi

Abstract

This is the first study in the academic literature to examine, using econometric methods, the cost impacts of three different approaches to structuring railway systems: vertical separation, vertical integration, and the intermediate holding company model. Our analysis is based on a panel of European and East Asian railways (1994-2010). We find that the optimal railway structure depends on the intensity and type of traffic running on the network. Our research suggests that, at least on cost grounds, countries should be free to choose between vertical integration, the holding company model, or vertical separation. © 2015 LSE and the University of Bath

Suggested Citation

  • 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.
    • Handle: RePEc:tpe:jtecpo:v:49:y:2015:i:3:p:496-515
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    Cited by:

    1. Tomeš, Zdeněk, 2017. "Do European reforms increase modal shares of railways?," Transport Policy, Elsevier, vol. 60(C), pages 143-151.
    2. Wang, Hongmei & Hu, Zitian & Cui, Xinyu & Yuan, Chun & Zhao, Yang, 2025. "Regional cooperation and corporate vertical disintegration: Evidence from Chinese listed companies," International Review of Economics & Finance, Elsevier, vol. 101(C).
    3. Shtele, Evgeniia & Beria, Paolo, 2025. "Using synthetic control method to evaluate the effect of a competitor's entry into high-speed rail market," Research in Transportation Economics, Elsevier, vol. 112(C).
    4. 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.
    5. Mizutani, Fumitoshi, 2020. "A comparison of vertical structural types in the railway industry: A simple mathematical explanation model," Research in Transportation Economics, Elsevier, vol. 81(C).
    6. 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.
    7. Hörcher, Daniel & Tirachini, Alejandro, 2021. "A review of public transport economics," Economics of Transportation, Elsevier, vol. 25(C).
    8. Mizutani, Fumitoshi & Uranishi, Shuji, 2020. "An analysis of the inter-effect of structural reforms and rail mode share," Research in Transportation Economics, Elsevier, vol. 81(C).
    9. Veeneman, Wijnand & Smith, Andrew, 2016. "Workshop 2 report: Effective institutional design, regulatory frameworks and contract strategies," Research in Transportation Economics, Elsevier, vol. 59(C), pages 60-64.
    10. Francisco Gildemir Ferreira Silva, 2022. "Brazilian railways separability infrastructure/operations: investigation by production indicators," SN Business & Economics, Springer, vol. 2(7), pages 1-25, July.
    11. Preston, John, 2018. "The wheels keep on turning: Is the end of rail franchising in Britain in sight?," Research in Transportation Economics, Elsevier, vol. 69(C), pages 187-196.
    12. Wellings, Richard (Ed.), 2022. "Planes, trains & automobiles: The future of transport after Covid-19," IEA Discussion Papers 104, Institute of Economic Affairs (IEA).
    13. Huang, Wencheng & Zhang, Yue & Shuai, Bin & Xu, Minhao & Xiao, Wei & Zhang, Rui & Xu, Yifei, 2019. "China railway industry reform evolution approach: Based on the Vertical Separation Model," Transportation Research Part A: Policy and Practice, Elsevier, vol. 130(C), pages 546-556.
    14. Mizutani, Fumitoshi, 2024. "Empirical analysis of the factors behind rail infrastructure investment," Transport Policy, Elsevier, vol. 150(C), pages 244-254.
    15. Scialà, Antonio & Stroffolini, Francesca, 2024. "The economics of regional railway regulation under vertical separation," Economics of Transportation, Elsevier, vol. 37(C).
    16. Wang, Yixiao & Wang, Kun & Pels, Eric & Wu, Jianhong, 2025. "Railway deregulation in the west and east: The impacts of organizational structure patterns on air-HSRs competition," Transportation Research Part B: Methodological, Elsevier, vol. 200(C).
    17. Phill Wheat & Alexander D. Stead & Yue Huang & Andrew Smith, 2019. "Lowering Transport Costs and Prices by Competition: Regulatory and Institutional Reforms in Low Income Countries," Sustainability, MDPI, vol. 11(21), pages 1-19, October.
    18. Lerida-Navarro, Carlos & Nombela, Gustavo & Tranchez-Martin, Jose M., 2019. "European railways: Liberalization and productive efficiency," Transport Policy, Elsevier, vol. 83(C), pages 57-67.
    19. Nakamura, Eri & Sakai, Hiroki, 2020. "Does vertical integration facilitate coordination between infrastructure management and train operating units in the rail sector? Implications for Japanese railways," Utilities Policy, Elsevier, vol. 66(C).
    20. Tomeš, Zdeněk & Pařil, Vilém, 2025. "Opening the tracks: The impact of rail liberalization on ridership growth in the Czech Republic," Research in Transportation Economics, Elsevier, vol. 111(C).
    21. Link, Heike, 2019. "The impact of including service quality into efficiency analysis: The case of franchising regional rail passenger serves in Germany," Transportation Research Part A: Policy and Practice, Elsevier, vol. 119(C), pages 284-300.

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