Decomposing efficiency into its managerial and its regulatory components: The case of European railways

The purpose of this paper is to decompose traditional measures of productive efficiency into a management and regulatory component. This procedure is applied to European railways. The policy implication of such a decomposition is obvious: management is responsible for just managerial inefficiency whereas governments are responsible for slacks in regulatory efficiency. Regulatory efficiency is based on indicators pertaining to managerial freedom of pricing, hiring and marketing decisions.