The cost structure of the Japanese railway industry : the economies of scale and scope and the regional gap of the Japan Railway after the privatization

Abstract

It is said that the privatization of the Japanese National Railway is a success since the management, productivity, and service have improved. However, as expected, the gap of both management and productivity tends to widen between the larger main-island JRs and the smaller three-island JRs. This paper will estimate the cost structure of the six JRs after the privatization. The main points we will make are as follows: first, the economies of scale exist in both the incumbent railway service and the Shinkansen service; second, there is no conclusive evidence to show that the economies of scope exist between them; third, the cost gap between the main-island JRs and the three-island JRs is large; and fourth, the cost gaps within them are also large.