A global perspective on railway inefficiency and the rise of state ownership, 1880-1912

The rise of state ownership was one of the most significant policy changes in the railway sector in the early 20th century. This paper estimates the cost inefficiency of railway sectors across countries using stochastic frontier models and examines whether the rise of state ownership affected inefficiency. The results show that the trends in inefficiency differed substantially across countries from the 1880s to 1912. They also show that inefficiency increased with greater nationalizations and decreased with greater state railway construction. A counterfactual analysis suggests that the rise of state ownership contributed to lower inefficiency in most countries, but the effects within countries varied depended on whether state ownership increased through nationalizations or new construction.