Scandinavian Working Papers in Economics

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

No 2018:20: The marginal cost of track reinvestments in the Swedish railway network: Using data to compare methods

Kristofer Odolinski , Sherzod Yarmukhamedov , Jan-Eric Nilsson and Mattias Haraldsson
Additional contact information
Kristofer Odolinski: CTS - Centre for Transport Studies Stockholm (KTH and VTI)
Sherzod Yarmukhamedov: The Swedish National Audit Office
Jan-Eric Nilsson: CTS - Centre for Transport Studies Stockholm (KTH and VTI)
Mattias Haraldsson: 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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