Understanding the costs of urban rail transport operations

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Understanding the costs of urban rail transport operations

Anupriya / Graham, Daniel J. / Carbo, Jose M. / Anderson, Richard J. / Bansal, Prateek

Highlights • Estimated a short-run cost function for urban rail transport (i.e. metro) operations • Used a unique panel dataset of 24 metro operations from across the globe. • Addressed various endogeneity challenges in such empirical analysis. • Found metro systems with high density of usage to be the most cost-efficient. • Provided new insights into existence of economies of scale in metro operations.

Abstract There is considerable variation in the average cost of operations across urban rail transport (or metro) systems. Since metros are typically owned and operated by public authorities, there is a public interest case in understanding the key drivers of their operational costs. This paper estimates short-run cost functions for metro operations using a unique panel dataset from twenty-four metro systems around the world. We use a flexible translog specification and apply dynamic panel generalised method of moments (DPGMM) estimation to control for confounding from observed and unobserved characteristics of metro operations. Our empirical results show that metro systems with a high density of usage are the most cost-efficient. We also find that operational costs fall as metro size increases. These results have important implications for the economic appraisal of metro systems.