European Railroad Deregulation. Does It Work?

Abstract

We analyzed the performance of the European railway public system over the period 2004 to 2014 in which the sector was subject to a substantial restructuring process and implementation of numerous deregulation and liberalization measures with the aim to revitalize the railway. This paper estimates simultaneously a model of stochastic production frontier and a model of technical inefficiency for 16 countries. The results show technological progress and improve on technical efficiency, but it is also noted the important cuts in inputs. The network heterogeneity shows that railroad systems with down network density and high percentage of electrified network are more efficiency. Likewise, we have analyzed the impact of subsidies and reforms implemented on railways efficiency. Maintenance subsidies improve efficiency due to reductions of incidents on the rail network, let more efficient and reliable service. While, operating subsidies have a negative effect because improve inefficient behavior. By the other hand, reforms have not had the expected results. We find that vertical separation is not necessary to achieve efficiency gains. The opening passenger market seems to lead to a greater efficiency gain, but freight market shows negative results although this result can be influenced by unfavorable economic context.