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Does yardstick regulation really work? Empirical evidence from Japan’s rail industry

  • Fumitoshi Mizutani
  • Hideo Kozumi
  • Noriaki Matsushima
Original Article

Abstract

This paper investigates the effectiveness of yardstick regulation by using a data set of rail companies in Japan and estimating the variable frontier cost function. In the variable cost function, both the coefficient of the yardstick regulation dummy and the coefficient of the competitive pressure outside the industry show the negative sign with statistical significance, indicating that the introduction of yardstick regulation and competition tend to decrease a rail company’s variable cost. Between 1995 and 2000, railways to which yardstick regulation was applied improved cost efficiency by about 11.5%.

Keywords

Yardstick regulation Incentive regulation Efficiency Cost frontier function 

JEL Classification

L51 L53 L90 K23 

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Copyright information

© Springer Science+Business Media, LLC 2009

Authors and Affiliations

  • Fumitoshi Mizutani
    • 1
  • Hideo Kozumi
    • 1
  • Noriaki Matsushima
    • 2
  1. 1.Graduate School of Business AdministrationKobe UniversityKobeJapan
  2. 2.Institute of Social and Economic ResearchOsaka UniversityIbaraki, OsakaJapan

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