Evaluating European railway deregulation using different approaches

There has recently been a great deal of interest in the impacts of the deregulating and restructuring measures in the European railway sector. A vast amount of literature is devoted to analyzing the effects of these deregulation and restructuring measures on efficiency and productivity and the results are not totally unambiguous. However, while most of the papers show that the introduction of competition within the sector (in both passenger and freight markets) has had a positive impact in terms of efficiency and productivity, the impact of vertical separation has produced different results in the literature. The contribution of this paper to the existing literature is twofold. Firstly we estimate efficiency levels (using a sample with information of 23 European national rail systems from 2001 to 2008) using alternative approaches. Then we compare the results of both techniques in order to analyze the potential differences between these approaches. Secondly we estimate the effects of the reforms on inefficiency levels and we find that the rankings obtained are similar, and that the best way to foster an increase in efficiency is always by combining vertical and horizontal reforms in the rail industry.

► This paper estimates productivity efficiency levels for a panel of 23 European rail systems using different approaches.
► Efficiency rankings provided by the different methodologies are similar.
► The vertical separation process, by itself, does not produce significant improvements in efficiency.
► Horizontal reforms (introduction of franchising systems or entry of new operators) seem to lead to a greater efficiency gain.
► Combining vertical and horizontal reforms is the best way to foster an increase in efficiency.