Presented by PhD student Valerio Benedetto at the CER (Community of European Railway and Infrastructure Companies) Economics group in Brussels on 17th September 2014. The presentation covered the progress of the research on the regulatory impact on railway efficiency, together with the formalisation of a questionnaire on the ideal rail regulator characteristics to be distributed to CER members. www.its.leeds.ac.uk/people/v.benedetto

1. Institute for Transport Studies
FACULTY OF ENVIRONMENT
Regulation impact on
efficiency of railways
Valerio Benedetto – PhD Student

2. Summary
1. Regulation impact
2. Rail Liberalisation Reports and Index
3. RLI-based regulatory index
4. Regulation variable in econometric model
5. Ideal regulator role and characteristics

3. 1. Regulation impact:
Framework
Aim: Effects on costs
Direct Indirect
Pressure on Through
Infrastructure non-discrimination /
Managers competition
Methodology
a) Review of IBM’s Rail
Liberalisation Reports
b) Construction of regulation indices
for 17 European rail systems
c) Econometric analyses involving
these indices
d) Qualitative work on ideal regulator
characteristics

4. 2. Rail Liberalisation
Reports and Index
Macro-areas
1. Legislative transposition of E.U.
directives and regulations
2. Effective implementation of
these policies
3. Competitive characteristics
of the market
Selected drivers
1a. General aspects of regulatory body
1b. Object of regulation
1c. Authority’s powers
2a. Licensing
2b. Safety certificates
2c. Homologation of vehicles
2d. Train path access conditions
2e. Infrastructure charging system
3a. Volume of market open to entry in
specific segments
IBM reports: overview on rail liberalisation processes across Europe

5. 3. RLI-based regulatory index:
Construction stages
Driver / Score 1 5 10
Transparency of
competence of
Regulatory Authority
No
Yes, but without
documentation
Yes, with
documentation
I. Collection of data from
reports issued in 2002,
2004, 2007 and 2011
II. Scores (S) for each
driver (D) from 1 (min)
to 10 (max)
III. Identical weights (W)
throughout the interval
taken from 2011 report
IV. Calculation of overall
scores (OS) for each
country (CY)
V. Interpolation for gap
years (average scores)
CY 1 2002 2004 2007 2011
OS 3.80 7.10 8.60 10.00
CY 1 W S02 (S*W) S03 (S*W) S04 (S*W) S05-06 (S*W) S07 (S*W) S08-10 (S*W) S11 (S*W)
D1 0.30 1 0.30 3 0.90 5 1.50 7.5 2.25 10 3.00 10 3.00 10 3.00
D2 0.70 5 3.50 6.5 4.55 8 5.60 8 5.60 8 5.60 9 6.30 10 7.00
OS 3.80 5.45 7.10 7.85 8.60 9.30 10.00
Driver / Weight W02 W04 W07 W11
D1 0.35 0.35 0.40 0.30
D2 0.65 0.65 0.60 0.70
Driver / Weight W02 W04 W07 W11
D1 0.30 0.30 0.30 0.30
D2 0.70 0.70 0.70 0.70

6. 4a. Econometric dataset
and model
• IBM-based regulatory indices variable estimating the
impact of regulation on rail efficiency (𝑹𝑬𝑮)
• This is inserted into the Mizutani-Uranishi dataset (2012),
also utilised in the EVES-Rail report (2012)
• For the period 2002-2010, 130 observations are generated
• The model is based on a translog cost function in which,
besides usual parameters related to output, inputs, network
and market structure, the regulation variable plays an
important role

7. 4b. Further work
i. Data
• Pre-2002 data for regulation is sought for, aiming at expanding the
interval back to 1994 (when original dataset starts)
ii. Model specification
• Effects due to the inclusion or exclusion of certain variables (e.g. vertical
integration, holding company, Train-km as output variables) need to be
investigated to obtain a sensitive specification of the model
iii. Study of freight competition
• Significance of competition in freight sector should be deeply analysed
through a separate model (related form and variables to be selected)
iv. Measurement issues
• Factors such as depreciation, outsourcing, cross-subsidisation and
public intervention require better modalities of measurement

8. 5a. From IBM-based index to
ideal regulator questionnaire
I. Stability and predictability
Avoiding frequent planning modifications in relation to infrastructure or
transport services that are required by short-term political aims
II. Non-discrimination
Connected with situations in which certain actors enjoy advantageous
conditions for access to relevant infrastructure
III. Distinction of responsibilities
In order for the authority to be able to provide accountability for its choices
and measures
Is the regulatory index capturing all the relevant themes? Can it be improved?
Which are the characteristics of an ideal rail regulator?
7 key areas found in literature

9. 5a. From IBM-based index to
ideal regulator questionnaire
IV. Human and financial resources
Relevant to the development of regulatory tasks
V. Transparency
Displaying in a public way the process and the results that substantiate
specific decisions
VI. Pro-activity and effectiveness
Planning to intervene on issues even when this has not been required by
business, constituting thereby autonomous capabilities for analysis and
interventions
VII. System efficiency
Power of obtaining data on efficiency and measures contrasting imperfect
allocation of resources

10. 5b. Questionnaires on ideal
regulator
• This process has led to the formalisation of a questionnaire
on the ideal rail regulator characteristics in order to assess
the current European scenarios in this field
• Two versions of this questionnaire:
a) For regulators and governments
b) For infrastructure managers and railway undertakings
• Questions cover the 7 key areas above
• Thanks to your co-operation, your answers to version b)
will be collected to perform quali-quantitative analyses