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Research Report / Transport

Incentive-based Governance of the Swiss Railway Sector

Author(s): FINGER Matthias, HOLTERMAN Martin

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The question of how the Swiss railway system should be organised and financed has been debated in Switzerland for over the past 20 years. Parallel with, but independently from, the debate in the European Union (EU), Switzerland has sought to make its railways financially more sustainable while at the same time ensuring that its performance stayed at its current high level, and was even improving, where possible.

The purpose of this study is to contribute to the present debate, yet on a more fundamental level. In particular, we offer a more conceptual analysis, grounded in new institutional economics, of the relationship between the way the different parts of the Swiss railway system are financed on the one hand and the overall performance of the sector on the other. Our broad research question is as follows: how should the Swiss railway sector be financed in order to achieve the highest possible level of performance? On the whole, we have found that in important respects the relationship between the design of the financing mechanisms used to fund the Swiss railway sector and the performance of that sector creates incentives that are weaker than what would be optimal.