Working papers in Transport Economics,
CTS - Centre for Transport Studies Stockholm (KTH and VTI)

Abstract: In this study, we analyze the difference between survival and corner solution models in estimating the marginal cost of reinvestments. Both approaches describe the reinvestment process in rather intuitively similar ways but have several methodological distinctions. We use Swedish railway data on track segment and section levels over the period 1999-2016 and focus on reinvestments in track superstructure. Results suggest the marginal costs from survival and corner solution models are SEK 0.0041 and SEK 0.0103, respectively. The conclusion is that the corner solution model is more appropriate, as this method consider the impact traffic has on the risk of reinvestment as well as on the size of the reinvestment cost. The survival approach does not consider the latter, which is problematic when we have systematic variations in costs due to traffic and infrastructure characteristics.

Keywords: railways; reinvestment; renewal; survival model; corner solution model; two-part model; marginal cost

JEL-codes: C41; H54; L92; R48

20 pages, October 15, 2018

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