The performance of subsidized urban and rural public bus operators: Empirical evidence from Norway

Abstract.The performance of Norwegian subsidized urban and rural bus operators is analyzed to gain insight about factors affecting it. Data Envelopment Analysis (DEA) is used to analyze efficiency differences in the sector. In addition, Mann-Whitney rank test is employed to test for efficiency and scale differences with respect to ownership, region of operation and scope of operation. The results suggest that there is in general a potential for input saving in the whole sector of about 28 percent. Nevertheless, while no significant differences are found between urban and rural operators with respect to input saving and output increasing efficiency scores, rural operators on average have lower mean scale efficiency and a higher variance of scale efficiency. Further, statistical tests using a Mann-Whitney rank test verify the latter. Thus the crucial issue in the Norwegian bus industry is less a question of differences in ownership or economies of scope but more a result of sub-optimal input allocation, which varies according to area of operations; either urban or rural. The analysis presented here also demonstrates that DEA is an appealing procedure for assessing efficiency in the bus industry, which is also easily acceptable to the decision-makers.