Quantitative Study on Privatization in Railway Idustry

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The main purpose of this study is to investigate to what extent efficiency and performance indicators have changed in the Japanese rail industry, such as among the JRs and large private railways, when ownership and/or management forms changed from the public to the private sector. The analysis was done by quantitative methods based upon econometrics and microeconomic theory. In FY1995, existing research literature was surveyed in order to concrete methodology and to find results on performance change through privatization. During that year, I also collected data in order to investigate the issues mentioned above. In FY1996, I did several quantitative analyzes after building models on productivity change and cost reduction. Furthermore, I analyzed the effects of ownership form and yardstick competition on operating cost reduction in Japanese large private railways. I have obtained several interesting results through analysis and these results have been and/or will be publishied in acade … More mic journals. Several omportant results obtained from this two-years analysis are summarized as follows :First of all, as for productivity improvement measured by labor productivity, it is true that privatization improves productivity. Based on labor productivity comparison models, privatization effects on labor productivity between 1981 and 1991 increased by about 29%. However, the labor productivity level of JRs is still lower than for large private railways by about 20%. Second, even if labor productivity was improved , the safety level did not deteriorated. As for serious accident rates, there is no difference between the preprivatization period and the after-privatization period. Third, based upon translog cost functions for JR and the private rail industry from 1970 to 1994, privatization reduced operating cost by annually about 0.2%. That means a cost saving of about 6.6 billion yen occurred annually. Fourth, using statistical analysis in both public and private railways, both ownership and competition effects on operating costs were found to be significant. In other words, private ownership and an increase of yardstick competition tend to decrease operating cost. Last, although further investigation is necessary, yardstick competition might work partially among large prizate railways. Less