Applied Economics, v. 47, n. 47, pp. 5103-5120. Abstract: This study investigates the drivers for output-increasing/input-saving potentials in the Brazilian railway industry, which has undergone significant transformations since its privatization in the mid-1990s. The main research objective is to determine whether or not different types of cargoes and geographic regions serviced present a significant impact on railway slacks by applying a distance friction minimization (DFM) approach with fixed factors. Based on a balanced panel model, secondary data from the period 2004 to 2012 were collected and analysed. Results support anecdotal evidence regarding a heterogeneous impact of types of cargo and geographic location on input-reducing and output-increasing potentials, besides network length and average speed. Policy implications for railway authorities are also addressed by focusing on the specifics of each railway operator.