The Myth of Unbundling the Railways in the Czech Republic

Abstract

Does unbundling ensure efficient railway transportation? The separation of railway operators and infrastructure is supposed to ensure efficient railway transportation. However, the experience with the unbundling of the railway operation in the Czech Republic suggests that unbundling does not work. In this paper, we investigate the hypothesis that the Czech railways represent an example of a network industry which is more efficient when it is concentrated. Therefore, the unbundling of railways in the Czech Republic favors particular political interests instead of efficient operation. Our hypothesis is supported by the growth of per unit costs that indicates the inefficient operation of unbundled Czech railways. We also looked at the volume of subsidies and the productivity of labor which indicate the particular interests of politicians and the management of the Czech railways.