Are conventional train passengers underserved after entry of high-speed rail?-Evidence from Chinese intercity markets

Abstract

Despite rich literature on high-speed rail (HSR) and air transport interactions, the HSR's impact on the conventional (low-speed) rail service surprisingly has yet well studied. This paper fills in this research gap by providing empirical evidence in the Chinese intercity travel markets, where large-scale HSR expansion has been conducted since 2008. A nested logit utility model is developed to model passengers' travel mode choice between HSR and conventional train. A difference-in-differences (DID) method is then applied to measure HSR's impact on conventional train service frequency, price, and travel time. This paper then calculates and compares the welfare changes before and after the HSR entry for both the conventional and non-conventional rail passengers. It is found that entry of HSR has significantly reduced frequency of conventional train service, but not its travel time and ticket price. Such an adverse effect is more prominent on the shorter haul routes, probably as a result of the government's intervention to divert rail passengers to emerging HSR service. The calculated welfare loss to the conventional train passengers based on its current market size is approximately 3.41 billion RMB (487 million USD) as of 2017, a figure we consider on the side of conservative estimates. This loss accounts for 8% of the welfare gain brought by HSR to those non-conventional rail passengers. A special caution is, therefore, warranted when evaluating the benefit of the HSR development, as the welfare damage to the conventional train service and its passengers cannot be neglected.