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The impact of competition on productive efficiency in European railways

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  • Gertjan Driessen
  • Mark Lijesen
  • Machiel Mulder

Abstract

This paper empirically explores the relationship between competition design and productive efficiency in the railway industry. We use Data Envelopment Analysis (DEA) to construct efficiency scores, and explain these scores, using variables reflecting institutional factors and competition design. Our results suggest that competitive tendering improves productive efficiency, which is in line with economic intuition as well as with expectations on the design of competition. We also find that free entry lowers productive efficiency. A possible explanation for this result is that free entry may disable railway operators to reap economies of density. Our final result is that more autonomy of management lowers productive efficiency. Most of the incumbent railway companies are state owned and do not face any competitive pressure. As a consequence, increased independence without sufficient competition and adequate regulation may deteriorate incentives for productive efficiency.

Suggested Citation

  • Gertjan Driessen & Mark Lijesen & Machiel Mulder, 2006. "The impact of competition on productive efficiency in European railways," CPB Discussion Paper 71, CPB Netherlands Bureau for Economic Policy Analysis.
  • Handle: RePEc:cpb:discus:71
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    References listed on IDEAS

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    Cited by:

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    2. Bai, Xue-jie & Zeng, Jin & Chiu, Yung-Ho, 2019. "Pre-evaluating efficiency gains from potential mergers and acquisitions based on the resampling DEA approach: Evidence from China's railway sector," Transport Policy, Elsevier, vol. 76(C), pages 46-56.
    3. Tomeš, Zdeněk, 2017. "Do European reforms increase modal shares of railways?," Transport Policy, Elsevier, vol. 60(C), pages 143-151.
    4. Viktoria Kocsis & Victoria Shestalova & Henry van der Wiel & Nick Zubanov & Ruslan Lukach & Bert Minne, 2009. "Relation entry, exit and productivity: an overview of recent theoretical and empirical literature," CPB Document 180, CPB Netherlands Bureau for Economic Policy Analysis.
    5. Bai, Xuejie & Jin, Zeng & Chiu, Yung-Ho, 2021. "Performance evaluation of China's railway passenger transportation sector," Research in Transportation Economics, Elsevier, vol. 90(C).
    6. Link, Heike, 2016. "A Two-Stage Efficiency Analysis of Rail Passenger Franchising in Germany," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 50(1), pages 76-92.
    7. Bougna, Emmanuel & Crozet, Yves, 2016. "Towards a liberalised European rail transport: Analysing and modelling the impact of competition on productive efficiency," Research in Transportation Economics, Elsevier, vol. 59(C), pages 358-367.
    8. Steffen Juranek, 2016. "Creating a National Champion: International Competition and Unbundling in Rail Transportation," Journal of Transport Economics and Policy, University of Bath, vol. 50(1), pages 56-75, January.
    9. Viktoria Kocsis & Victoria Shestalova & Henry van der Wiel & Nick Zubanov & Ruslan Lukach & Bert Minne, 2009. "Relation entry, exit and productivity: an overview of recent theoretical and empirical literature," CPB Document 180.rdf, CPB Netherlands Bureau for Economic Policy Analysis.
    10. Stojadinović, Nikola & Bošković, Branislav & Trifunović, Dejan & Janković, Slađana, 2019. "Train path congestion management: Using hybrid auctions for decentralized railway capacity allocation," Transportation Research Part A: Policy and Practice, Elsevier, vol. 129(C), pages 123-139.
    11. Mette Asmild & Torben Holvad & Jens Hougaard & Dorte Kronborg, 2009. "Railway reforms: do they influence operating efficiency?," Transportation, Springer, vol. 36(5), pages 617-638, September.
    12. Rico Merkert & Andrew S.J. Smith & Chris A. Nash, 2009. "Benchmarking of train operating firms -- a transaction cost efficiency analysis," Transportation Planning and Technology, Taylor & Francis Journals, vol. 33(1), pages 35-53, October.
    13. Matthias Aistleitner & Christian Grimm & Jakob Kapeller, 2018. "Auftragsvergabe, Leistungsqualitaet und Kostenintensitaet im Schienenpersonenverkehr. Eine internationale Perspektive," ICAE Working Papers 86, Johannes Kepler University, Institute for Comprehensive Analysis of the Economy.
    14. Sabien Dobbelaere & Mark Vancauteren, 2014. "Market imperfections, skills and total factor productivity : Firm-level evidence on Belgium and the Netherlands," Working Paper Research 267, National Bank of Belgium.
    15. Suzanne Kok & Nicole Bosch & Anja Deelen & Rob Euwals, 2011. "Migrant Women on the Labour Market," CPB Discussion Paper 180.rdf, CPB Netherlands Bureau for Economic Policy Analysis.
    16. Finger, Matthias, 2014. "Governance of competition and performance in European railways: An analysis of five cases," Utilities Policy, Elsevier, vol. 31(C), pages 278-288.
    17. Orea, Luis & Rodríguez-Álvarez, Ana & Kumbhakar, Subal, 2008. "Explaining Occupancy Rates in the European Railways: a Reduced-Form Approach," Efficiency Series Papers 2008/04, University of Oviedo, Department of Economics, Oviedo Efficiency Group (OEG).
    18. 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.
    19. 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.
    20. 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.
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    22. Carlos Gutiérrez-Hita & Aurora Ruiz-Rua, 2019. "Competition in the railway passenger market: The challenge of liberalization," Competition and Regulation in Network Industries, , vol. 20(2), pages 164-183, June.

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    More about this item

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out
    • L92 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Railroads and Other Surface Transportation

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