Abstract
This paper investigates the vertical relationship between infrastructure provision and railway operations and evaluates the effects of privatization and deregulation on the firm-specific efficiency and total factor productivity (TFP) growth in the Korean and Japanese railways. Using a stochastic frontier approach and a generalized translog functional form, the paper specifies the equation system consisting of a multiproduct variable cost function and input share equations which is estimated with the Zellner’s iterative seemingly unrelated regression and the corrected least squares method. The empirical results indicate that there are cost complementarities between infrastructure provision and overall railway operations and cost anticomplementarities between incumbent passenger and freight outputs in the Korean railways, and between Shinkansen and incumbent passenger outputs in the Japanese railways. They also indicate that the firm-specific efficiencies and TFP growth rates of the privately-owned JRs are higher than those of the government-owned KNR and JNR.
