Measuring Technical Efficiency in North and South American Railways using Stochastic Frontier Model: An International Comparison

The latter half of the 1980s and 1990s was a period characterized as in which radical changes took place for many rail industries around the world. During the 1990s, as a result of rail reforms, a total of 44 railways in 16 countries were privatized or concessioned. These changes were registered in several issues such as: structure, organization, ownership, regulation, etc. In fact, even now, the effects of such changes remain in this sector. Railways in North and South America were not exempt from rail reform. Today, the most important railways in the region, in terms of volumes of traffic, and extension, have experienced a privatization process. This chapter is organized as follows. Section 2 discusses and compares the different methods and approaches to measure technical efficiency. Section 3 presents the selection of the approach and the specific techniques used in the empirical estimation of technical efficiency in selected railways in North and South America. Section 4 describes the construction and specification of the model as well as the obtained results and conclusions and final remarks are presented in the final section.