Nature or nurture: why do railroads carry greater freight share in the United States than in Europe?

During the 1950s, the share of freight carried by railroads was similar and declining in both the United States and Europe. By 2000, the railroads’ share of freight (measured in ton–kilometers) had reached 38% in the United States while falling to 8% in Europe. This paper examines the reasons for the difference in rail’s share of freight in Europe and the United States. We find that almost 83% of the gap in 2000 is probably due to natural or inherent differences, principally geography, shipment distance, and commodity mix. However, 17% of the gap cannot be explained by these inherent differences and is presumably due to public policies including priority of passenger service, lack of interoperability at borders, service quality and rates, and incentives of the rail operators. We estimate that if that policy gap were closed, railroads’ share of freight in Europe would increase from 8% to 13%.