The Impact of Economic Regulation on the Efficiency of European Railway Systems

In recent years, European railway regulation has been subject to major reform, with the powers, independence, and responsibilities of rail regulators across Europe strengthened considerably. We study the impact of these reforms on the efficiency levels of a panel of 17 European railways (2002–10). The novelty lies in the incorporation of a multi-dimensional rail regulation index — capturing the complexity of regulatory powers and activities — into an econometric framework alongside other reform variables. Our results suggest that the cost-reducing benefits of regulatory reform depend on the degree of (actual or desired) market openness, vertical structure, and the intensity of network usage.