Hedonic versus homogeneous output specifications of railroad technology: Belgian railroads 1950-1986

The purpose of this paper is twofold. First, using data on Belgian railroad operations, the first application of hedonic output aggregation is provided to the railroad industry. Second, the traditional homogeneous output approach is compared with the use of these hedonic aggregates and differences in estimates of input substitution possibilities, returns to scale, and productivity growth are carefully evaluated. It is found that ignoring the role of operating characteristics in cost analyses implies substantial bias in estimates of railroad technology.