Edited by Chris Nash
Chapter 2: Road and rail infrastructure costs
Transportation has been a traditional field for developing and testing methods of production and cost function analysis. Originally, research has been driven by questions such as how costs vary with transport volume, how to separate costs among multiple outputs, and whether transport services experience returns to scale, scope and density. Later on, measuring and comparing productive efficiency across firms over time has become a further motivation to the methodological and empirical development of tools for cost function analysis. However, while cost function studies have been conducted for almost all modes of transport, the analysis of transport infrastructure costs in a narrow sense (roads, rail tracks, terminals) has only recently attracted research interest, mainly driven by the need to derive efficient charges for the use of transport infrastructure. Consequently, available studies focus on the pricing purpose and are motivated by deriving estimates of marginal cost for infrastructure operation, maintenance and renewals as part of a social marginal cost pricing scheme. Only rare examples deal with productivity and efficiency analysis. The focus of this chapter is thus on the use of cost function analysis for deriving marginal cost estimates. However, given a potential future interest in efficiency analyses for road and rail work within benchmarking tools for regulation policy, this chapter will also briefly discuss the major approaches in this area.
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