The effects of competition and ownership on railways – plans to introduce competition in Finland
Abstract
This study assesses the prerequisites for introducing competitive tendering in Finland’s railway transport and its potential effects. Scale economies, joint production benefits, and the advantages arising from traffic density that are characteristic of the railway sector clearly limit the potential positive effects of competition. Introducing competition is only justified if the impact of competition itself is sufficiently positive and strong to offset these disadvantages.
The study also compares the productivity of Finnish railways with that of other European railways using a simple labour productivity indicator. The high productivity of Finnish railways relative to other countries, despite low traffic volumes per track kilometre, as well as their high quality, suggest that VR’s operations have been internationally efficient. This limits the potential for performance improvements through competition. Efficiency and quality are difficult to improve if operators are attracted to Finland who do not achieve the same level of efficiency in their home countries as VR achieves in Finland. (AI translation)
