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Abstract

This study undertakes a cost-benefit analysis of the German railway market looking specifically at the effects of high-speed rail development on railway passenger subsidies. Using OLS regression analysis, I estimate a demand curve for the German railway network at the route level; this is combined with cost curve estimates to yield a required subsidy for rail development assuming a natural monopoly market structure. I find that an increase in demand as a result of the introduction of high-speed rail technology causes a 23.9% decrease in required rail subsidies.

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