Assessing the Level of State Aid to the Railway Sector in Selected European Countries: Insights from the Italian Case

European Journal of Business and Economics, 8 (4) pp. 1-9, 2013

9 Pages Posted: 3 Jan 2016

See all articles by Ugo Arrigo

Ugo Arrigo

Università degli Studi di Milano-Bicocca - Department of Business Administration, Finance, Management and Law

Giacomo Di Foggia

University of Milano - Bicocca - Department of Business and Law

Date Written: 2013

Abstract

This paper is aimed at analysing state aid to the railway sector in selected countries of the European Union. Although this is a preliminary exercise, literature lacks of specificity. From the analysis, a highly differentiated situation emerges: a group of countries with permanently lower subsidies (the Iberians, the Scandinavians and Austria); a group of countries with a medium level of subsidies (all of the major countries: Germany, France and the UK) and a group of countries with permanently high subsidies (Italy, Denmark, Belgium and the Netherlands). This paper demonstrates that railways have so far benefited from weakened forms state aid control. This can be motivated (i) by the need for modal rebalance recognised by national transport policies, (ii) by the natural monopolistic character of the network whose duplication is not economically feasible and (iii) by the non-competitive traditional structure, from a legal point of view, of even the transport service. This situation, however, is set to change drastically with the opening up of services to competition, which has already been done in the European Union for the freight sector and in some countries, although only on a voluntary basis, even for the passenger sector. By focusing on Italy, this study finds that the elevated state aid to the rail sector consequently results in both a major public finance problem and a potential factor of competition distortion.

Keywords: Railways, State aid, Public finance, Subsidies, Europe, Competition

JEL Classification: H81, L92, L43

Suggested Citation

Arrigo, Ugo and Di Foggia, Giacomo, Assessing the Level of State Aid to the Railway Sector in Selected European Countries: Insights from the Italian Case (2013). European Journal of Business and Economics, 8 (4) pp. 1-9, 2013, Available at SSRN: https://ssrn.com/abstract=2710054

Ugo Arrigo

Università degli Studi di Milano-Bicocca - Department of Business Administration, Finance, Management and Law ( email )

Edificio U7, IV piano
via Bicocca degli Arcimboldi
Milan, 8 - 20126
Italy

Giacomo Di Foggia (Contact Author)

University of Milano - Bicocca - Department of Business and Law ( email )

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