Regulating Public Transit Networks: How Do Urban-Intercity Diversification and Speed-Up Measures Affect Firms' Cost Performance?

Empirical studies on the cost structure of Public Transit Networks are mainly based on specialized firms providing urban or intercity services. In this study we estimate a translogarithmic variable cost function to assess the behaviour of returns to scale and the impact of network characteristics. The analysis is based on a sample of 45 Italian municipal companies observed from 1996 to 1998 and including both specialized and mixed transit operators. Results confirm previous evidence on the existence of natural monopoly in the industry and support a regulation introducing competitive tenders to access to the market. In addition, we provide insights about the advantages associated with urban-intercity diversification and with the improvement of network commercial speed. Cost benefits can then be achieved by promoting mergers between neighbouring firms, so as to create new companies operating on integrated local networks and supplying in combination urban and intercity public transport. Implications of such a strategy for the design of tender mechanisms are also underlined, together with the need for a regulatory policy which takes more care of speed-up measures.

[1]  Pierre Wunsch,et al.  Cost and Productivity of Major Urban Transit Systems in Europe , 1996 .

[2]  Philip A. Viton,et al.  Consolidations of scale and scope in urban transit , 1992 .

[3]  Daniele Fabbri La Stima di Frontiere di Costo nel Trasporto Pubblico Locale: una Rassegna e un'Applicazione , 1996 .

[4]  Massimo Filippini,et al.  Cost Structure and efficiency of Local Public Transport: The case of Emilia Romagna bus companies , 1993 .

[5]  K. Button,et al.  AN EXAMINATION OF THE COST STRUCTURES ASSOCIATED WITH PROVIDING URBAN BUS SERVICES IN BRITAIN , 1985 .

[6]  Matthew G. Karlaftis,et al.  COST STRUCTURES OF PUBLIC TRANSIT SYSTEMS: A PANEL DATA ANALYSIS , 2002 .

[7]  Ronald R. Braeutigam,et al.  Optimal policies for natural monopolies , 1989 .

[8]  Anna Matas,et al.  Technical characteristics and efficiency of urban bus companies: The case of Spain , 1998 .

[9]  David A. Hensher Urban Transport Economics , 1977 .

[10]  R. Robert Russell,et al.  Will the Real Elasticity of Substitution Please Stand Up? (A Comparison of the Allen/Uzawa and Morishima Elasticities) , 1989 .

[11]  R J Windle TRANSIT POLICY AND THE COST STRUCTURE OF URBAN BUS TRANSPORTATION. FROM THE BOOK BUS DEREGULATION AND PRIVATISATION , 1988 .

[12]  Massimiliano Piacenza,et al.  Regulatory Contracts and Cost Efficiency: Stochastic Frontier Evidence from the Italian Local Public Transport , 2006 .

[13]  Bruno De Borger Cost and Productivity in Regional Bus Transportation: The Belgian Case , 1984 .

[14]  J. Berechman COSTS, ECONOMIES OF SCALE AND FACTOR DEMAND IN BUS TRANSPORT , 1982 .

[15]  Douglas W. Caves,et al.  Productivity Growth, Scale Economies, and Capacity Utilization in U.S. Railroads, 1955-74 , 1981 .

[16]  J. Berechman Public transit economics and deregulation policy , 1993 .

[17]  Kofi Obeng THE ECONOMICS OF BUS TRANSIT OPERATION , 1984 .

[18]  Michael W. Tretheway,et al.  Analytical Studies in Transport Economics: Network effects and the measurement of returns to scale and density for U.S. railroads , 1986 .

[19]  R. Todd Jewell,et al.  Media substitution and economies of scale in advertising , 2000 .

[20]  Carlo Cambini,et al.  Competitive Tendering and Optimal Size in the Regional Bus Transportation Industry: An Example from Italy , 2003 .

[21]  John C. Panzar,et al.  Technological determinants of firm and industry structure , 1989 .

[22]  P. Viton A TRANSLOG COST FUNCTION FOR URBAN BUS TRANSIT , 1981 .

[23]  E. Berndt,et al.  Technology, Prices, and the Derived Demand for Energy , 1975 .

[24]  R. Halvorsen,et al.  The Interpretation of Dummy Variables in Semilogarithmic Equations , 1980 .

[25]  Ian Smith,et al.  THE DEMAND FOR PUBLIC TRANSPORT: SOME ESTIMATES FROM ZURICH , 1994 .

[26]  Carlo Cambini,et al.  Il trasporto pubblico locale in Italia. Dopo la riforma i difficili albori di un mercato , 2002 .

[27]  Andreas Andrikopoulos,et al.  TECHNOLOGICAL CHANGE AND SCALE ECONOMIES IN URBAN TRANSPORTATION ( , 1992 .

[28]  Kofi Obeng,et al.  SUBSIDIES AND INEFFICIENCY: STOCHASTIC FRONTIER APPROACH , 1997 .

[29]  Joseph Berechman Cost structure and production technology in transit: An application to the Israeli bus transit sector , 1987 .

[30]  Ernst R. Berndt,et al.  The Practice of Econometrics: Classic and Contemporary. , 1992 .

[31]  L. R. Christensen,et al.  THE IMPORTANCE OF ECONOMIES OF SCALE, CAPACITY UTILIZATION, AND DENSITY IN EXPLAINING INTERINDUSTRY DIFFERENCES IN PRODUCTIVITY GROWTH , 1988 .

[32]  Wayne K. Talley,et al.  AN URBAN TRANSIT FIRM PROVIDING TRANSIT, PARATRANSIT AND CONTRACTED-OUT SERVICES : A COST ANALYSIS , 1986 .

[33]  F Cheung,et al.  STOCHASTIC FRONTIER MODELS FOR PUBLIC TRANSPORT , 1999 .

[34]  J. Laffont,et al.  A Theory of Incentives in Procurement and Regulation , 1993 .

[35]  M. Filippini Economies of scale and utilization in the Swiss electric power distribution industry , 1996 .

[36]  Rosella Levaggi Parametric and non parametric approach to efficiency: the case of urban transport in Italy , 1994 .

[37]  James Nolan,et al.  DETERMINANTS OF PRODUCTIVE EFFICIENCY IN URBAN TRANSIT , 1996 .

[38]  G. Gilbert,et al.  COST STRUCTURE OF THE INTERCITY BUS INDUSTRY , 1983 .

[39]  Kristiaan Kerstens,et al.  Public transit performance: What does one learn from frontier studies? , 2002 .

[40]  V. Smith Experiments with a Decentralized Mechanism for Public Good Decisions , 1980 .

[41]  A. Zellner An Efficient Method of Estimating Seemingly Unrelated Regressions and Tests for Aggregation Bias , 1962 .

[42]  Giovanni Fraquelli,et al.  Il trasporto pubblico locale in Italia: variabili esplicative dei divari di costo tra le imprese , 2001 .

[43]  Henry-Jean Gathon Indicators Of Partial Productivity And Technical Efficiency In The European Urban Transit Sector , 1989 .

[44]  Philip A. Viton How big should transit be? Evidence on the benefits of reorganization from the San Francisco Bay Area , 1993 .

[45]  H. Demsetz,et al.  Why Regulate Utilities , 1968 .

[46]  W. Greene,et al.  Economies of Scale in U.S. Electric Power Generation , 1976, Journal of Political Economy.

[47]  Marc Ivaldi,et al.  Incentive Regulatory Policies: The Case of Public Transit Systems in France , 2002 .

[48]  Massimo Filippini,et al.  INEFFICIENCY IN A REGULATED INDUSTRY , 1992 .

[49]  Philippe Gagnepain Structures productives de l'industrie du transport urbain et effets des schémas réglementaires , 1998 .

[50]  W. Diewert Applications of Duality Theory , 1974 .