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Economies of Scope in European Railways: An Efficiency Analysis

Author

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  • Christian Growitsch

    () (Halle Institute for Economic Research)

  • Heike Wetzel

    () (Energiewirtschaftliches Institut an der Universität zu Köln, Germany)

Abstract

In the course of railway reforms at the end of the last century, European na- tional governments, as well the EU Commission, decided to open markets and to separate railway networks from train operations. Vertically integrated railway com- panies argue that such a separation of infrastructure and operations would diminish the advantages of vertical integration and would therefore not be suitable to raise economic welfare. In this paper, we conduct a pan-European analysis to investi- gate the performance of European railways with a particular focus on economies of scope associated with vertical integration. We test the hypothesis that integrated railways realize economies of joint production and, thus, produce railway services on a higher level of efficiency. To determine whether joint or separate production is more efficient we apply an innovative Data Envelopment Analysis super-efficiency bootstrapping model which relates the efficiency for integrated production to a vir- tual reference set consisting of the separated production technology and which is applicable to other network industries as energy and telecommunication as well. Our findings are that for a majority of European Railway companies economies of scope exist.

Suggested Citation

  • Christian Growitsch & Heike Wetzel, 2006. "Economies of Scope in European Railways: An Efficiency Analysis," Working Paper Series in Economics 29, University of Lüneburg, Institute of Economics.
  • Handle: RePEc:lue:wpaper:29
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    References listed on IDEAS

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    Cited by:

    1. Russell Pittman, 2009. "Competition Issues in Restructuring Ports and Railways, Including Brief Consideration of these Sectors in India," EAG Discussions Papers 200906, Department of Justice, Antitrust Division.
    2. Pittman, Russell, 2011. "Risk-averse restructuring of freight railways in China," Utilities Policy, Elsevier, vol. 19(3), pages 152-160.
    3. R. Pittman, 2009. "Railway Mergers and Railway Alliances: Competition Issues and Lessons for Other Network Industries," Competition and Regulation in Network Industries, Intersentia, vol. 10(3), pages 259-279, September.
    4. Abbott, Malcolm & Cohen, Bruce, 2016. "The privatization and de-privatization of rail industry assets in Australia and New Zealand," Utilities Policy, Elsevier, vol. 41(C), pages 48-56.
    5. 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.
    6. Russell Pittman, 2007. "Make or buy on the Russian railway? Coase, Williamson, and Tsar Nicholas II," Economic Change and Restructuring, Springer, vol. 40(3), pages 207-221, September.
    7. Krol, Marcin, 2009. "Benefits and Costs of vertical Separation in Network Industries. The Case of Railway Transport in the European Environment," MPRA Paper 23815, University Library of Munich, Germany.
    8. Pittman, Russell, 2007. "Options for Restructuring the State-Owned Monopoly Railway," Research in Transportation Economics, Elsevier, vol. 20(1), pages 179-198, January.

    More about this item

    Keywords

    Efficiency; Vertical Integration; Railway Industry;

    JEL classification:

    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L43 - Industrial Organization - - Antitrust Issues and Policies - - - Legal Monopolies and Regulation or Deregulation
    • L92 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Railroads and Other Surface Transportation

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