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Marginal railway infrastructure cost estimates in the presence of unobserved effects

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Abstract

New railway legislation in Sweden has increased the need for transparent access charges on the Swedish railway network. The purpose of this paper is to estimate cost functions for infrastructure operation, maintenance and renewal in the Swedish national railway network, using unobserved effects models. The estimated cost functions are used to calculate the marginal cost for railway infrastructure wear and tear and give the Swedish National Rail Administration (Banverket) support in designing a marginal cost based pricing scheme in line with Swedish transport policy. A panel of 185 track sections is observed during 1999-2002. Collected data covers infrastructure, traffic and cost data. Despite having a rich set of information, unobserved effects are assumed to exist, which will bias estimates by ordinary least squares (OLS) due to omitted variables. We therefore use random effects specifications to estimate our models. We find evidence of unobserved effects at a track district level for infrastructure operation, maintenance and renewal costs. We estimate the marginal infrastructure operation cost to SEK 0.50 per train kilometre and the marginal maintenance cost to SEK 0.0029 per gross tonne kilometre. Combining maintenance and renewal cost increases the estimate to SEK 0.0065 per gross tonne kilometre. For all models, elasticities and marginal cost estimates are in line with previous work using pooled ordinary least squares (Andersson, In press).

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  • Andersson, Mats, 2006. "Marginal railway infrastructure cost estimates in the presence of unobserved effects," Working Papers 2006:6, Swedish National Road & Transport Research Institute (VTI).
    • Handle: RePEc:hhs:vtiwps:2006_006
    Note: WP 2007:11 is a substantially revised version of this paper.
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    Cited by:

    1. Marc Gaudry & Emile Quinet, 2009. "Track wear-and-tear cost by traffic class: Functional form, zero output levels and marginal cost pricing recovery on the French rail network," Working Papers halshs-00574977, HAL.
    2. Marc Gaudry & Emile Quinet, 2015. "Correlation within SNCF administrative regions among track segment maintenance cost equation residuals of a country-wide model," PSE Working Papers halshs-01112249, HAL.
    3. Marc Gaudry & Emile Quinet, 2015. "Correlation within SNCF administrative regions among track segment maintenance cost equation residuals of a country-wide model," Working Papers halshs-01112249, HAL.
    4. Marc Gaudry & Bernard Lapeyre & Emile Quinet, 2015. "Infrastructure maintenance, regeneration and service quality economics: A rail example," PSE Working Papers halshs-00559637, HAL.
    5. Andrew Smith & Phill Wheat, 2012. "Estimation of cost inefficiency in panel data models with firm specific and sub-company specific effects," Journal of Productivity Analysis, Springer, vol. 37(1), pages 27-40, February.

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    More about this item

    Keywords

    Railway; Infrastructure operation; Maintenance; Renewal; Marginal costs; Unobserved effects models;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • 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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