YARDSTICK REGULATION IN THE JAPANESE RAILWAY INDUSTRY

摘要

This study verifies whether yardstick regulation in the Japanese railway industry works effectively. About this, some previous studies show two contrasting results, and there is need to be further studied. From the survey of the previous studies, this study focuses on a fare revision.To assess this, we calculate the Malmquist productivity index for 15 large private railway companies using data envelopment analysis. This index includes the technical efficiency explicitly. We examine our hypothesis that fare revision have impacted the effectiveness of yardstick regulation in Japan. To test the hypothesis, we compare the differences in productivity between companies that revised their fares and those that did not.We find that the fare revision companies grew their productivity for three years before their fare revisions compared with the non-revision companies with this difference being statistically significant. The difference between these two groups after the fare revision and during the whole period was not significant. In other words, the effect of the yardstick regulation on productivity was restricted to the three years before fare revisions.This study shows quantitatively that the fare revision affected the effectiveness of the regulation. In Japan where prices continue to fall, it was suggested that regulation did not give an effect substantially. So this study concluded that the policy to raise the frequency of the fare revision was needed. This is important as policy implication for the Japanese railway industry.