Cost structure and productivity growth of the Taiwan Railway

This paper studies the multi-product cost structure and productivity growth of the Taiwan Railway through the period 1991–2000. A short-run translog cost function is estimated using monthly time-series data in which pension/compensation expenses are regarded as a quasi-fixed factor, and the variables of operating characteristics for freight and passenger services are incorporated. Our results show technological change in the Taiwan Railway is not Hick’s neutral, and both economies of scale and scope are present. Further, TFP growth has improved in recent years and is mainly driven by technological progress and scale economies.