This Paper, co-authored with David Newbery, studies the interaction between repeated auctions of rail franchises of different lengths, uncertainty, and incentives for investment in rolling stock, following the privatisation of British Rail. Theoretical predictions are tested empirically using a unique  panel of data. 

This paper contributes to the debate on investment in transport infrastructure and the allocation of public funds between road and railway projects. We use a consistent social cost-benefit methodology to appraise investment in typical new inter-urban road and rail project. Our results suggest that road improvements have substantially higher returns than railway schemes. These findings cast doubt on the rationale of the new transport policy for the UK which proposes to allocate more public funds to the (private) railways than total new investment in strategic roads.

Abstract:  Twenty-five operating companies (TOCs) were created between 1994-1997, as part of the restructing process of the railway industry in Great Britain. The TOC operate monopoly franchises for the provision of passengers of passenger rail services over certain routes - some of which continue to receive government subsidies. 

This paper investigates how the efficiency of these train operating companies has evolved over the period since privatisation using data envelopment analysis (DEA) and corrected ordinary least squares (COLS). Our data allows us to look at the evolution of relative efficiency and productivity through the privatisation and to perform second-stage regression analysis of the effciency scores using safety, quality and environmental data. The analysis sheds some light on the success and failures of the UK's most controversial privatisation to date.

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