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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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    1. John Kennedy & Andrew S. J. Smith, 2004. "Assessing the Efficient Cost of Sustaining Britain's Rail Network: Perspectives based on Zonal Comparisons," Journal of Transport Economics and Policy, University of Bath, vol. 38(2), pages 157-190, May.
    2. Hausman, Jerry, 2015. "Specification tests in econometrics," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 38(2), pages 112-134.
    3. Johansson, Per & Nilsson, Jan-Eric, 2004. "An economic analysis of track maintenance costs," Transport Policy, Elsevier, vol. 11(3), pages 277-286, July.
    4. Link, Heike & Nilsson, Jan-Eric, 2005. "Infrastructure," Research in Transportation Economics, Elsevier, vol. 14(1), pages 49-83, January.
    5. Chris Nash, 2005. "Rail Infrastructure Charges in Europe," Journal of Transport Economics and Policy, University of Bath, vol. 39(3), pages 259-278, September.
    6. 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.
    7. Kennedy, J. & Smith, A.S.J., 2003. "Assessing the efficient cost of sustaining Britain’s rail network: perspectives based on Zonal comparisons," Cambridge Working Papers in Economics 0317, Faculty of Economics, University of Cambridge.
    8. Zvi Griliches, 1972. "Cost Allocation in Railroad Regulation," Bell Journal of Economics, The RAND Corporation, vol. 3(1), pages 26-41, Spring.
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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.

    More about this item

    Keywords

    Railway; Infrastructure operation; Maintenance; Renewal; Marginal costs; Unobserved effects models;

    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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