Why are the railways of Eastern Europe less efficient than those of the West?

Abstract

We use a DEA analysis to compare the efficiency of the railways of Western and Eastern Europe and find while most railways of Western Europe are on the efficiency frontier, those of Eastern Europe are typically a long way from it. One explanation may be that the reform process only started much later in Eastern Europe than in the West, although it appears that Eastern Europe has largely caught up. Secondly, Eastern Europe suffered a significant loss of traffic after the end of the communist regime, and this may still be resulting in an excess of labour and assets. There is some evidence that this remains the case for labour and freight vehicles. Although the excess of freight vehicles may be largely vehicles out of service, they still contribute to the poor efficiency scores for Eastern Europe. It is also the case that the countries of Eastern Europe suffer some disadvantages in terms of population density. However, we believe that two aspects of policy play an important role in the poorer performance of Eastern European countries compared with Western. Firstly, is the poorer infrastructure quality associated with lower levels of investment. This shows up as less use of electric traction and slower train speeds, resulting in lower productivity of staff and assets. Despite the efforts of the European Commission to overcome this problem, there is still a long way to go. Secondly, is the strong use of public service obligations to maintain high levels of service with relatively low load factors. If it is desired to raise the efficiency of Eastern European railways, governments in Eastern Europe will need to consider whether they are specifying excessively high levels of service.