The Liberalization of Rail Transport in the European Union

ii " Quite possibly there's nothing as fine as a big freight train starting across country in early summer... That's when you learn that the tragedy of plants is that they have roots. " – Mark Helprin, Winter's Tale (1983) iii Acknowledgements First of all, I would like to express my sincere gratitude to my thesis adviser, Professor Monika Lopez-Anuarbe. Thanks to her excellent academic guidance, especially in game theory principles, I was able to develop this study in great depth and detail. Her continual encouragement throughout the course of the thesis was invaluable. I am also thankful to Professor Lopez's willingness to proofread every piece of work I produced. I would like to thank Ms. Annette Kern, lecturer at IES European Union in Freiburg, Germany. The coursework in her EU Competition Policy class greatly stimulated my interest in railway liberalization and provided me with solid understanding of the topic. Peppard has been my good friend and reliable major adviser since my freshman year. I am grateful to his support to develop the honors proposal and for his useful advice during the final phase of the thesis. Professor Mukherjee is the faculty member with whom I have taken the most number of courses. My research experience with her fostered important quantitative and analytical skills, which I employed extensively during the course of this thesis. I also received her valuable advice to develop the econometric tests for this study. Lastly, I would like to thank Eurostat's User Support Team for their quick responses and useful suggestions for my data collection. Had it not been for their help, I would not have discovered the available dataset by the International Union of Railways. iv Abstract This study presents multiple approaches to examine the liberalization of rail transport in the European Union. A legislative review highlights the importance of unbundling infrastructure management and service operations in railway reforms. Furthermore, simultaneous and sequential decision making models specify how market opening minimizes the social deadweight loss and lead to more competitive pricing. Two production frontier models also analyze the effects of vertical disintegration and market opening on network outputs. Results suggest that both vertical unbundling and increasing competitiveness help improve productivity. Lastly, three case studies compare policy implementations across Europe. The United Kingdom, a front runner in railway liberalization, has used franchising to split up British Rail extensively. Germany's integrated model, which keeps the infrastructure manager …