The Impact of Structural Reforms and Regulations on the Demand Side in the Railway Industry

Abstract The main purpose of this study is to evaluate factors affecting passenger rail demand, with special attention to the effects of structural reform/regulation and competition. In order to do this, we use data obtained from 30 OECD countries for the 24 years from 1990 to 2013. As structural reform/regulation and competition variables, we take the OECD’s five kinds of regulatory indices: (i) overall, (ii) entry, (iii) public ownership, (iv) vertical integration, and (v) market structure; and for competition variables, we take (vi) rail passenger-freight ratio, (vii) rail share, and (viii) high-speed train ratio. As estimation methods, both the fixed effect model and the Hausman-Taylor estimation model are used. The major findings are as follows. First, competition as competitiveness (i.e. the share of rail, passenger over freight ratio) increases passenger demand. And the existence of high-speed trains increases passenger demand. Second, overall, entry regulation, and market structure have no significant effect on demand. Third, public ownership affects passenger demand positively. Last, vertical integration reduces passenger demand.