Determinants of metro operating costs : an econometric analysis

Cities are indispensable for economic development, although urban agglomerations can fail to deliver their potential due to congestion. Metros are key to achieving the benefits of urban densities without the costs of congestion, by means of providing unparalleled fast and high-capacity transportation in densely populated areas. These urban rail systems require large one-off initial investments but also substantial operational costs, in order to provide the regular day-to-day rail service and maintain the metro's fixed and mobile assets in good condition, such as the rail tracks and the trains, respectively. The aim of this thesis is to better understand what determines these operational costs. The analysis is based on a panel of more than 20 large and medium-sized urban rail systems across the world during the period 2005 to 2014. The research is based on the econometric estimation of cost functions for the aggregate operating costs but also for some of its constituents like train service, station service and rolling stock maintenance costs. Likewise, different outputs are considered to evaluate the cost efficiency of the metros, such as car kilometres, passenger journeys and train hours among others. The analysis quantifies the effects of economies of scale and economies of density in metro operations, which can vary significantly between different divisions of the metro operations leading to substantial policy implications. Moreover, the effect of wages, and how this is linked to labour productivity, is also examined. The dissertation also estimates the corresponding cost elasticities for other cost factors such as labour outsourcing, subsidies and network characteristics. Lastly, the research describes the effect of age on urban rail operating costs and also outlines the background time trends on how the metro operating costs could evolve in the future.