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Parallel Tracks: The Impact of Independent Regulators on Open-accessCompetition in the Railways
Lorenzo Casullo1 Luca Bellodi2
1OECD, Governance Directorate2UCL, School of Public Policy
Introducing On-track Competition in Passenger Rail ServicesMasaryk University, Brno
14 March 2019
14 March 2019 1 / 15
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Structure of the Presentation
1 Institutional Context, Literature
2 Research Question and Theoretical Argument
3 Research Design
4 Findings
5 Conclusion and Limitations
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Institutional Context
Rail Market Reforms in the EU:Two pillars of EU reforms
Market liberalisation of freight and passenger services (Fourth Railway Package)Empowerment of Independent Regulators (IRAs) (Recast Directive 2012/34/RU)
The rationale of the reforms: Competition → Efficiency → AttractivenessIRAs: credible commitment to the liberalisation policy(monitoring, appeal, and sanctioning powers powers)
14 March 2019 3 / 15
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Institutional Context
Rail Market Reforms in the EU:
Two pillars of EU reformsMarket liberalisation of freight and passenger services (Fourth Railway Package)
Empowerment of Independent Regulators (IRAs) (Recast Directive 2012/34/RU)
The rationale of the reforms: Competition → Efficiency → AttractivenessIRAs: credible commitment to the liberalisation policy(monitoring, appeal, and sanctioning powers powers)
14 March 2019 3 / 15
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Institutional Context
Rail Market Reforms in the EU:Two pillars of EU reforms
Market liberalisation of freight and passenger services (Fourth Railway Package)Empowerment of Independent Regulators (IRAs) (Recast Directive 2012/34/RU)
The rationale of the reforms: Competition → Efficiency → AttractivenessIRAs: credible commitment to the liberalisation policy(monitoring, appeal, and sanctioning powers powers)
14 March 2019 3 / 15
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Institutional Context
Rail Market Reforms in the EU:Two pillars of EU reforms
Market liberalisation of freight and passenger services (Fourth Railway Package)Empowerment of Independent Regulators (IRAs) (Recast Directive 2012/34/RU)
The rationale of the reforms: Competition → Efficiency → AttractivenessIRAs: credible commitment to the liberalisation policy(monitoring, appeal, and sanctioning powers powers)
14 March 2019 3 / 15
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Institutional Context
Rail Market Reforms in the EU:Two pillars of EU reforms
Market liberalisation of freight and passenger services (Fourth Railway Package)Empowerment of Independent Regulators (IRAs) (Recast Directive 2012/34/RU)
The rationale of the reforms:
Competition → Efficiency → AttractivenessIRAs: credible commitment to the liberalisation policy(monitoring, appeal, and sanctioning powers powers)
14 March 2019 3 / 15
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Institutional Context
Rail Market Reforms in the EU:Two pillars of EU reforms
Market liberalisation of freight and passenger services (Fourth Railway Package)Empowerment of Independent Regulators (IRAs) (Recast Directive 2012/34/RU)
The rationale of the reforms: Competition → Efficiency → Attractiveness
IRAs: credible commitment to the liberalisation policy(monitoring, appeal, and sanctioning powers powers)
14 March 2019 3 / 15
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Institutional Context
Rail Market Reforms in the EU:Two pillars of EU reforms
Market liberalisation of freight and passenger services (Fourth Railway Package)Empowerment of Independent Regulators (IRAs) (Recast Directive 2012/34/RU)
The rationale of the reforms: Competition → Efficiency → AttractivenessIRAs: credible commitment to the liberalisation policy(monitoring, appeal, and sanctioning powers powers)
14 March 2019 3 / 15
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Open-access Competition in the EUSource: IRG-Rail (2018)
14 March 2019 4 / 15
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Research Question and Theoretical Argument
Research QuestionAre stronger regulators (i.e., more independence and powers) associated with moreopen-access competition?
TheoryIndependent Regulators → Credible Commitment → Favourable Environments→ Larger market share of non-incumbent operators
14 March 2019 5 / 15
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Research Question and Theoretical Argument
Research QuestionAre stronger regulators (i.e., more independence and powers) associated with moreopen-access competition?
TheoryIndependent Regulators → Credible Commitment → Favourable Environments→ Larger market share of non-incumbent operators
14 March 2019 5 / 15
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Research Design
DatasetSample: EU Countries with de jure liberalisation of open-access services (n = 15)Independent Variable: OECD Indicators on the Governance of Market RegulatorsQuestionnaire capturing:
IndependenceCompetencesAccountability
Dependent Variable: Average market share of non-incumbent operators (2013-17)Market share: train-km of open-access operators / total pax train-kmSource: Annual reports of operators and infrastructure managers
14 March 2019 6 / 15
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Research Design
DatasetSample: EU Countries with de jure liberalisation of open-access services (n = 15)
Independent Variable: OECD Indicators on the Governance of Market RegulatorsQuestionnaire capturing:
IndependenceCompetencesAccountability
Dependent Variable: Average market share of non-incumbent operators (2013-17)Market share: train-km of open-access operators / total pax train-kmSource: Annual reports of operators and infrastructure managers
14 March 2019 6 / 15
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Research Design
DatasetSample: EU Countries with de jure liberalisation of open-access services (n = 15)Independent Variable: OECD Indicators on the Governance of Market Regulators
Questionnaire capturing:IndependenceCompetencesAccountability
Dependent Variable: Average market share of non-incumbent operators (2013-17)Market share: train-km of open-access operators / total pax train-kmSource: Annual reports of operators and infrastructure managers
14 March 2019 6 / 15
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Research Design
DatasetSample: EU Countries with de jure liberalisation of open-access services (n = 15)Independent Variable: OECD Indicators on the Governance of Market RegulatorsQuestionnaire capturing:
IndependenceCompetencesAccountability
Dependent Variable: Average market share of non-incumbent operators (2013-17)Market share: train-km of open-access operators / total pax train-kmSource: Annual reports of operators and infrastructure managers
14 March 2019 6 / 15
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Research Design
DatasetSample: EU Countries with de jure liberalisation of open-access services (n = 15)Independent Variable: OECD Indicators on the Governance of Market RegulatorsQuestionnaire capturing:
IndependenceCompetencesAccountability
Dependent Variable: Average market share of non-incumbent operators (2013-17)
Market share: train-km of open-access operators / total pax train-kmSource: Annual reports of operators and infrastructure managers
14 March 2019 6 / 15
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Research Design
DatasetSample: EU Countries with de jure liberalisation of open-access services (n = 15)Independent Variable: OECD Indicators on the Governance of Market RegulatorsQuestionnaire capturing:
IndependenceCompetencesAccountability
Dependent Variable: Average market share of non-incumbent operators (2013-17)Market share: train-km of open-access operators / total pax train-kmSource: Annual reports of operators and infrastructure managers
14 March 2019 6 / 15
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Descriptive Statistics
Variable Mean St.dv. Min. Max.Average Market Share (2013-17) 1.62 2.34 0.00 7.32
Strength of Regulator (REG) 8.09 1.07 6.72 9.95
REG = Independence + Competences [0,12]
14 March 2019 7 / 15
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Methods
Multiple quantitative tests:Correlation testDifference in means, t-testsOLS regressionLogistic regressionTime fixed-effects model
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ResultsPearson’s product-moment correlation test
Positive Corr = .55, significant at 5%
0
2
4
7 8 9 10
REG 2018
Ave
rage
Mar
ket S
hare
201
3−20
17
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ResultsPearson’s product-moment correlation test
Positive Corr = .55, significant at 5%
0
2
4
7 8 9 10
REG 2018
Ave
rage
Mar
ket S
hare
201
3−20
17
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Difference in meansCountries with and without competition
Statistically sign. at 10%, p-value = .09
Countries N Market Share (2013-17) REGWith Competition 7 2.88 8.65
Without Competition 8 0.00 7.62
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OLS Regression
14 March 2019 11 / 15
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14 March 2019 12 / 15
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Logistic Regression
14 March 2019 13 / 15
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Time fixed-effect model
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Conclusions and Limitations
First (exploratory) study of the impact of IRAs on market competition
It shows the potential to use OECD PMR IndicatorsSevere limitations due to small sample sizePromising field of research if better data made available(Good luck to us all!)Thank you
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Conclusions and Limitations
First (exploratory) study of the impact of IRAs on market competitionIt shows the potential to use OECD PMR Indicators
Severe limitations due to small sample sizePromising field of research if better data made available(Good luck to us all!)Thank you
14 March 2019 15 / 15
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Conclusions and Limitations
First (exploratory) study of the impact of IRAs on market competitionIt shows the potential to use OECD PMR IndicatorsSevere limitations due to small sample size
Promising field of research if better data made available(Good luck to us all!)Thank you
14 March 2019 15 / 15
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Conclusions and Limitations
First (exploratory) study of the impact of IRAs on market competitionIt shows the potential to use OECD PMR IndicatorsSevere limitations due to small sample sizePromising field of research if better data made available
(Good luck to us all!)Thank you
14 March 2019 15 / 15
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Conclusions and Limitations
First (exploratory) study of the impact of IRAs on market competitionIt shows the potential to use OECD PMR IndicatorsSevere limitations due to small sample sizePromising field of research if better data made available(Good luck to us all!)
Thank you
14 March 2019 15 / 15
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Conclusions and Limitations
First (exploratory) study of the impact of IRAs on market competitionIt shows the potential to use OECD PMR IndicatorsSevere limitations due to small sample sizePromising field of research if better data made available(Good luck to us all!)Thank you
14 March 2019 15 / 15
