EFFICIENCY AND REGULATION IN THE CASE OF THE SWISS PRIVATE RAILWAYS

This paper discusses the efficiency of the Swiss Private Railways in an economic and regulatory context. For this purpose, scale efficiency and overall cost efficiency for 48 Swiss private railway companies are investigated. A translog cost function for a four-year panel is estimated and measures of economies of scale and density are derived. A compound indicator for network size and structure is introduced. The estimation results allow for a discussion of efficiency in terms of optimal scale and density. Overall cost efficiency is estimated by means of a frontier cost function. The findings on efficiency are discussed in the Swiss political and regulatory context. More specifically, a regression on the influence of ownership and subsidy structure on the efficiency is performed. The findings are that most of the Swiss private railway companies operate at an inappropriately low scale and density. While the companies are rather homogenous in terms of overall cost efficiency, evidence is found for a significant influence of regulation in terms of the subsidy structure.