Franchising Regional Rail Passenger Services in Germany – New Evidence on the Efficiency in Using Subsidies

Abstract

This paper examines the outcomes of franchising regional rail passenger services in Germany at the global level and analyses the regional differences in the efficiency of using subsidies for franchised regional rail services. It provides evidence on the positive outcomes of the franchising approach at the global scale regarding service supply, patronage, subsidies paid and quality of service. The regional differences in the use of funds are studied by means of a two-stage efficiency analysis which includes quality of service variables and financial indicators. It is based on a panel dataset for the period 2003-2014 for a subsample of 22 public transport authorities. The analysis shows that a higher share of tendering, a higher share of gross contracts and longer and smaller contracts were efficiency-enhancing factors in the period of analysis. These impacts are found both in a model without inclusion of quality of service variables and models which includes them.