System Size and Cost Structure of Transit Industry
Publication: Journal of Transportation Engineering
Volume 125, Issue 3
Abstract
Knowledge of the cost and production structure of transit systems can be instrumental in uncovering an array of important information regarding their operation. Optimal fleet size and pricing, average and marginal cost, and the potential for success of deregulation and privatization efforts can be addressed successfully when the cost structure of transit systems is known. Research on the cost structure of mass transit systems using panel data frequently shows conflicting results with respect to issues such as economies of scale and density, and factor substitution elasticities. In this analysis we extend prior research in two significant directions. First, we control for cross-sectional heterogeneity that may otherwise seriously bias the resulting parameter estimates. Second, we make an explicit effort to capture differences in the economies of scale between large, medium, and small transit systems. Based on panel data for fixed-route public transit systems, the results indicate that transit services are characterized by a nonhomothetic production function, exhibiting returns to density and scale that depend on the size of the transit firm.
Get full access to this article
View all available purchase options and get full access to this article.
References
1.
Berechman, J. ( 1983). “Analysis of costs, economies of scale and factor demand in bus transit.” J. Transport Economics and Policy, 17(1), 1–16.
2.
Berechman, J. ( 1987). “Cost structure and production technology in transit.” Regional Sci. and Urban Economics, 17, 519–534.
3.
Berechman, J. ( 1993). Public transit economics and deregulation policy. North-Holland, Amsterdam.
4.
Berechman, J., and Giuliano, G. ( 1984). “Analysis of the cost structure of an urban bus transit property.” Transp. Res. B, 18B(4/5), 277–287.
5.
Berndt, E. R. ( 1991). The practice of econometrics: Classic and contemporary. Addison-Wesley, Reading, Mass.
6.
Button, K., and O'Donnell, K. J. ( 1986). “The costs of urban bus provision in Great Britain.” Transp. Plng. and Technol., 10, 293–303.
7.
De Borger, B. ( 1984). “Cost and productivity in regional bus transportation: The Belgium case study.” J. Industrial Economics, 37(1), 35–54.
8.
de Rus, G. ( 1990). “Public transport demand in Spain.” J. Transport Economics and Policy, May, 189–201.
9.
Guenthner, R. P., and Sinha, K. C. ( 1982). “Maintenance, schedule reliability and transit system performance.” Transp. Res. A, 17A(5), 355–362.
10.
Karlaftis, M. G. ( 1996). “On the cost structure, efficiency and productivity of mass transit systems,” PhD dissertation, Purdue School of Civil Engineering, West Lafayette, Ind.
11.
Obeng, K. ( 1983). “Transit input demand elasticities.” J. Advanced Transp., 17(1), 73–88.
12.
Obeng, K. ( 1984). “The economics of bus transit operation.” Logistics and Transp. Rev., 20(1), 45–65.
13.
Obeng, K. ( 1985). “Bus cost, productivity and factor substitution.” J. Transport Economics and Policy, 19(2), 183–203.
14.
Obeng, K. ( 1987). “Classification of the bus transit policy variables.” Transp. Plng. and Technol., 11, 257–272.
15.
Shephard, R. W. ( 1953). Cost and production functions. Princeton University Press, Princeton, N.J.
16.
Sinha, K. C., Bhandari, A. S., Dobry, D. B., and Jukins, D. P. ( 1978). “A comprehensive analysis of urban bus transit efficiency and productivity. Executive summary.” Tech. Rep. No. CE-TRA-78-5, School of Civil Engineering, Purdue University, West Lafayette, Ind.
17.
Varian, H. R. ( 1992). Microeconomic analysis. W. W. Norton, New York.
18.
Viton, P. A. ( 1981). “On competition and product differentiation in urban transportation: The San Francisco Bay area.” Bell J. of Economics, 12, 362–379.
19.
Williams, M., and Dalal, A. ( 1981). “Estimation of the elasticity of factor substitution in urban bus transportation: A cost function approach.” J. Regional Sci., 21(2), 263–275.
20.
Williams, M., and Hall, C. ( 1981). “Returns to scale in the United States intercity bus industry.” Regional Sci. and Urban Economics, 11, 573–584.
21.
Zellner, A. ( 1962). “An efficient method of estimating seemingly unrelated regressions and tests for aggregation bias.” J. Am. Statistical Assoc., 58(2), 348–368.
Information & Authors
Information
Published In
History
Received: Apr 15, 1998
Published online: May 1, 1999
Published in print: May 1999
Authors
Metrics & Citations
Metrics
Citations
Download citation
If you have the appropriate software installed, you can download article citation data to the citation manager of your choice. Simply select your manager software from the list below and click Download.