Estimating the inefficiency in the Norwegian bus industry from stochastic cost frontier models

A stochastic cost frontier function based on data from 170 of the 175 Norwegian subsidized bus companies is estimated under two alternative presumptions regarding the distribution of the inefficency among the bus operators. When the inefficiency is assumed to be half-normally distributed, the average inefficiency in the industry is estimated to be 13.7 per cent. This calculated value is nearly halved (7.2 per cent) when the exponential distribution is applied, while the ranking of the companies according to inefficiency is unchanged. By regressing the estimated inefficiency values for each company on some exogenous variables describing its ownership structure and the subsidy policy which it faces, it is seen that inefficiency of the companies which negotiate with the public authorities over the subsidy amounts is slightly higher than the inefficiency of the companies which face a subsidy policy based on cost norms. Our analysis gives, however, no significant differences in the efficiency between privately owned bus companies and publicly owned bus operators, and shows only minor economies of scale.     

Acquisition,efficiency and scale economies: An analysis of the British bus industry

The British Bus industry has undergone considerable transformation since privatization. Five major operators have emerged to dominate the market, a position almost exclusively attained through acquisition. This paper reviews the economies of scale argument commonly cited for this change and gives an overview of the acquisition process. It questions whether this argument gives a complete explanation for this industry development. For 58 individual companies, the level of technical efficiency attributable to firms operating at or near the optimum level of output is examined over 5 years to determine if mergers in practice have resulted in scale economies. Technical efficiency is estimated using data envelopment analysis, under assumptions of constant and variable returns to scale. Efficiency scores are then regressed on a time trend and a merger dummy to test whether acquired firms' efficiency has significantly improved above the average. It was found that over the period, efficiency had improved. This improvement, however, cannot be wholly attributed to the achievement of economies of scale. More specifically, there has been an improvement in the internal efficiency of acquired firms and some scale economies within group companies, the latter of which may have resulted from the eradication of competition.     

Evaluating efficiency in the Norwegian bus industry using data envelopment analysis

This paper focuses on the performance of Norwegian bus companies subsidized by the government. The performance is evaluated from a productive efficiency point of view. The framework is that of a deterministic non-parametric Data Envelopment Analysis (DEA) approach to efficiency measurement. In this context several important issues are addressed: efficiency rankings, distribution and scale properties in the bus industry, potentials for efficiency improvements in the sector, the impact of ownership, area of operation and scope, and ways of improving efficiency in the sector. The findings show that the average bus company exhibits increasing return to scale in production of its services. The extent of such returns however vary, with size and is more prevalent among smaller companies. The average bus company is found to have a considerable input saving potential of about 28 percent. Neither economies of scope nor company ownership are found to have an influence on company performance. It is suggested that geographical factors need a closer attention in future research. The implications of DEA results are discussed and concluding remarks offered.     

Port privatization,efficiency and competitiveness: Some empirical evidence from container ports (terminals)

Few studies have investigated the quantitative relationship between port ownership structure and port efficiency with mixed results. This study applies a stochastic frontier model proposed by Battese and Coelli [Battese, G.E., Coelli, T.J., 1995. A model for technique inefficiency effects in a stochastic frontier production function for panel data. Empirical Economics 20, 325–332], which incorporates the inefficiency effect, to show whether port privatization is a necessary strategy for ports to gain a competitive advantage. While this stochastic frontier model has been used to a wide number of industries where the technical inefficiency effect is required, this method has rarely been employed to port industry. This study also investigates the determinants of port competitiveness. Both the principal component analysis (PCA) and the linear regression model are used to examine the effects of identified key factors on port competitiveness. Based on a sample of selected container terminals around the world, the results of this study have shown that private sector participation in the port industry to some extent can improve port operation efficiency, which will in turn increase port competitiveness. Another important determinant of port competitiveness is the adaptability to the customers’ demand. All these results provide some policy implications and guidance for port authorities and port operators in formulating effective strategies to improve their competitiveness vis-à-vis rivals.     

Effects of corruption on efficiency of the European airports

The effect of corruption on airport productive efficiency is analyzed using an unbalanced panel data of major European airports from 2003 to 2009. We first compute the residual (or net) variable factor productivity using the multilateral index number method and then apply robust cluster random effects model in order to evaluate the importance of corruption. We find strong evidence that corruption has negative impacts on airport operating efficiency; and the effects depend on the ownership form of the airport. The results suggest that airports under mixed public–private ownership with private majority achieve lower levels of efficiency when located in more corrupt countries. They even operate less efficiently than fully and/or majority government owned airports in high corruption environment. We control for economic regulation, competition level and other airports’ characteristics. Our empirical results survive several robustness checks including different control variables, three alternative corruption measures: International Country Risk Guide (ICRG) corruption index, Corruption Perception Index (CPI) and Control of Corruption Index (CCI). The empirical findings have important policy implications for management and ownership structuring of airports operating in countries that suffer from higher levels of corruption.     

E-commerce and traffic congestion: An economic and policy analysis

E-commerce, due to its ability to re-direct consumers from physical stores to online, can potentially alleviate traffic congestion. In this paper, we set up a theoretic model to analyze interactions between a firm’s distribution strategy and traffic congestion. In an unregulated economy, we first characterize the private firm’s optimal strategy concerning e-commerce under the influence of traffic congestion. We then examine a centralized economy where the firm is publicly owned and derive the distribution strategy that maximizes social welfare. Comparing the two cases, we show that the private firm’s incentives may deviate from the socially optimal decisions, which leads to inefficiency. We identify two effects, i.e., monopoly effect and congestion externality effect, which drive the private firm to deviate from the social optimum. Based on our analysis, we propose a differentiated tolls/rebates policy to achieve maximum social welfare. Under such a policy, the firm will not only adopt the socially optimal distribution strategy but offer the socially optimal quantities.     

Joint impact of competition,ownership form and economic regulation on airport performance and pricing

The combined impact of ownership form, economic regulation and competition on airport performance is analyzed using data envelopment analysis to measure cost efficiency in the first stage and regression analysis to measure the impact of the environment in the second stage. The empirical results of an analysis of European and Australian airports over a 10 year timeframe reveal that under relatively non-competitive conditions, public airports operate less cost efficiently than fully private airports. Irrespective of ownership form, regulation is necessary to emulate competitive forces thus pushing airport management towards cost efficiency and reasonable pricing policies. Under potential regional or hub competition, economic regulation inhibits airports of any ownership form from operating and pricing efficiently. Although public and fully private airports operate equally efficiently in a competitive setting, private airports still set higher aeronautical charges. Furthermore, mixed ownership forms with a majority public holding are neither cost efficient nor low price, irrespective of the level of competition.     

Economic analysis of ride-sourcing markets

Ride-sourcing refers to an emerging urban mobility service that private car owners drive their own vehicles to provide for-hire rides. This paper analyzes the ride-sourcing market using an aggregate model where the matchings between customers and drivers are captured by an exogenous matching function. It is found that without any regulatory intervention a monopoly ride-sourcing platform will maximize the joint profit with its drivers. On the other hand, the first-best solution is not sustainable when the matching function exhibits increasing returns to scale and the cost function of the platform is subject to economies of scale. Regardless of the examined market scenarios, the average waiting time of customers is proportional to the average searching time of drivers. We establish conditions for regulators to solely regulate the commission charged by the platform to guarantee the second-best. We further investigate the competition of ride-sourcing platforms and find that competition does not necessarily lower the price level or improve social welfare. In the latter case, regulators may rather encourage the merger of the platforms and regulate them directly as a monopolist.     

Organizational form and performance in urban mass transit

Ownership and management for urban mass transit organizations have taken many forms over the years, with publicly‐owned and managed systems now dominant. In recent years, however, strong economic and political forces have increased pressures for privatizing urban mass transit services. This review analyses 20 studies from three countries (predominantly the U.S.A.) on the relationship between organizational form and fixed‐route bus transit performance. It concludes that previous research has not made a persuasive case for the whole‐scale privatization of either ownership or management of urban mass transit organization. Conclusions here are intended to apply to the U.S.A. as well as other countries with mixed enterprise systems in which choices about organizational form may have some consequence for performance.     

Strategic beliefs of port authorities

Over the last decade, insights from the strategic management discipline have increasingly been applied to ports. A review of literature shows that in the analysis of port authority strategy, mainly outside-in approaches are applied. This paper adds to the emerging understanding of the port authority’s strategy by applying a cognitive perspective. Specifically, the strategic cognition of firms’ executives is one of the explanatory variables behind firms’ strategic decisions. Furthermore, cognitions are influenced by the organisational contexts in which port authority executives have worked. As a result, managerial “mental maps’ may vary across industry contexts and over time. This research investigates the strategic cognition of a global set of port authority executives through a survey-based instrument. The results show that, to a large extent, PAs resemble “regular” for-profit companies, but that they possess some specific beliefs that distinguish them from “regular” companies.     

A new era for airport regulators through capacity investments

Private and public airports’ optimal actions may not coincide. While private airports usually pursue profit maximization, publicly owned airports look for maximum social welfare. Thus, the prices charged by private airports may differ from the socially optimal charges and public intervention may be needed. In this paper, we analyze airport charges when an increase in frequency produces positive or negative externalities and carriers have market power. We use the methodology of game theory to show that there may exist a level of capacity for which private and social objectives coincide, so no price regulation is needed. Thus, the usual role of regulators and planners could be modified in order to decide the appropriate capacity investments for which airport regulation is no longer necessary.     

Organizational and Ownership Transformation in Poland’s Urban Transport Companies

Abstract

This paper seeks to reconstruct the organizational and ownership transformation involving Poland’s urban transport that companies passed through after 1990. Data collected from various sources (above all the Internet, including the Bulletins of Public Information) were used to establish the degree of advancement of the transformation processes. Despite the passage of nearly two decades since the new economic reforms were launched, the privatization processes involving enterprises of municipal origin are not well‐advanced. There is not a single private company among the organizers of urban transport. Instead, an absolute domination of budgetary‐sphere entities may be noted. Furthermore, there are seven transport municipal unions. Among the operators (carriers) public ownership remains dominant in the form of single‐person local authority companies, local government companies, municipal union ownerships, municipal companies as well as budgetary units. Privatization processes have encompassed fewer than 10% of all operators in the form of companies with foreign participation, workers’ companies and companies with Polish non‐public sector participation. Moreover, in 20 localities urban transport is supplied by multi‐trade municipal services enterprises (as of end‐2008). Thus, transformation processes, though started earlier than in the case of Poland’s State Road Transport coach companies, are much less advanced.     

Liberalisation and efficiency in international air transport

This paper sets out to compare the economic and technical efficiency of international air transport companies, within the new liberalisation framework that characterises the period of 1996–2000. For this purpose, two stochastic frontiers are estimated, one for cost function, the other for production function. From these estimations we obtain indexes for, respectively, economic and technical efficiency. Our evidence suggests that the benefits of increasing competition in terms of efficiency, is being large for the Asian companies.     

National policy towards cars: Singapore

Singapore has experienced rapid growth in car ownership, and private transport accounts for just under half of motorized trips in Singapore. Yet only since 1970 have determined efforts been made to curtail this increase. Simultaneously with this growth, Singapore's land‐use planners had called for the diversion of population growth into outlying residential estates while maintaining the central area's importance as an employment centre. The resulting anticipated concentration of commuter movement suggested a need for controls to restrain car ownership, reduce central‐area congestion and divert road users on to public transport. The policies followed are described. Those against ownership have included heavy road taxes and registration fees, with a system of discounts on the latter to discourage new purchasers except when replacing scrapped cars. Policies against car use include fuel taxes and the Area Licensing Scheme in the city centre, while parking space is also closely regulated. The measures adopted imply a goal of efficiency in promoting Singapore's planning objectives rather than environmental, safety or equity considerations, although the first two of these have lately received much more attention than formerly. The policies’ effect has been a temporary reversal in the growth of car ownership, but this growth has since resumed and recent further fee increases suggest a panic reaction rather than a coordinated strategy. Such coordination appears at present to be hampered by the fragmented administration of matters relating to transport. Other measures relating to car ownership and use in Singapore are also described.     

The impact of competition on container port (in)efficiency

There are many studies on container port efficiency and that seek to understand what factors, such as technical and scale efficiency, private versus public terminal management or macro-economic factors, play on the efficiency score of a given port. There are fewer studies that focus on the role played by the inter-port competitive environment. This role remains difficult to assess. In fact, on the one hand, a port subject to high inter-port competition may record higher efficiency scores due to the pressure from the competitive environment. On the other hand, a port subject to high competition may be forced to over-invest and could therefore records a lower efficiency score. This article investigates this issue and examines how the degree of competition measured at different levels (local, regional and global level) impacts the efficiency score of a given container port. To do so, we implement a truncated regression with a parametric bootstrapping model. The model applied to information gathered for 200 container ports in 2007 and 2010 leads to the following conclusions: port efficiency decreases with competition intensity when measured in a range of 400–800 km (regional level); and the effect from competition is not significant when competition is measured at a local (less than 300 km) or at a global (more than 800 km) level. Estimates also show a tendency for ports who invested from 2007 to 2010 to experience a general decrease in efficiency scores, an element which could be explained by the time lag between the investment and the subsequent potential increase in container throughput.     

Technical efficiency measurement and explanation of French urban transit companies

The performance of a sample of French urban transit companies is evaluated using a broad selection of nonparametric reference technologies for two specifications of the production process. In particular, the variable returns to scale Data Envelopment Analysis (DEA) models with either strong or weak disposability in both inputs and outputs, and the Free Disposal Hull (FDH) are applied. An extensive comparison of the resulting radial output efficiency measures yields the following major methodological conclusions. First, the location of the efficiency distributions differs substantially depending on the methodology and especially on the output specification considered. The latter differences vanish if the impact of outliers is eliminated. Second, convexity has a stronger influence on the efficient-inefficient dichotomy than allowing for congestion by means of a weakly disposable DEA model. For policy purposes, these efficiency distributions are explained using a Tobit model. The findings corroborate results reported elsewhere: the relevance of ownership, the use of risk-sharing incentives in contracting, the harmful impact of subsidies, etc. Furthermore, the network structure seems to account for some differences in performance. Finally, a novelty in the urban transit context is the indirect monitoring effect of the French earmarked transportation tax.     

What Happened to the National Road Carrier in a Post‐Communist Country? The Case of Poland's State Road Transport

Abstract

The purpose of this article is to seek to reconstruct the ownership transformation involving Poland's State Road Transport (PKS) companies passed through after 1990. Data collected from various sources (above all the Internet) were used to establish the degree of advancement of the transformation processes. Despite the passage of 18 years since the new economic reforms were launched, privatization processes are not well advanced. State ownership remains dominant, in the form of Treasury companies as well as state‐owned enterprises. Privatization processes have encompassed fewer than half of all firms, the most popular form taken (in about a quarter of all analysed cases) involving leasing by workers. This would seem of major interest, attesting as it does to the greater activity of some worker's teams, as well as the passive role of the state in privatization processes. A much smaller number of firms (26) have been purchased by external investors, the only important international concern among these being Veolia, which had taken control of 11 PKS companies as of mid‐2006. By and large, it is the firms carrying passengers or passenger and goods that are in a much better situation, as opposed to the companies that are commodity‐carriers only. The majority of the latter have collapsed, or have undergone the kind of privatization that involves simultaneous shutdown. Mixed passenger and goods carriers have had to reduce their level of activity in commodity transport.     

A stochastic frontier model of the efficiency of major container terminals in Asia: assessing the influence of administrative and ownership structures

This paper applies a `port function matrix' to analyse the administrative and ownership structures of major container ports in Asia. The relative efficiency of these ports is then assessed using the cross-sectional and panel data versions of the `stochastic frontier model'. The estimated efficiency measures are broadly similar for the two versions of the model tested. From the results of the analysis, it is concluded that the size of a port or terminal is closely correlated with its efficiency and that some support exists for the claim that the transformation of ownership from public to private sector improves economic efficiency. While this provides some justification for the many programmes in Asian ports which aim to attract private capital into both existing and new facilities, it is also concluded that the level of market deregulation is an important intervening variable which may also exert a positive influence.     

Stochastic optimization approach for the car placement problem in ridesharing systems

With the increasing fuel prices and the pressure towards greener modes of transportation, ridesharing has emerged as an alternative to private car ownership and public transportation. In this paper, we focus on a common destination ridesharing system which is of interest in large organizations such as companies and government offices. Particularly, such organizations are looking at using company owned vehicles to offer a ridesharing service by which employees carpool to work thus leading to several benefits that include decreasing pressure on on-campus parking spaces, lowering localized on-campus congestion, in addition to offering a greener transportation mode while lowering transportation costs for employees. Based on discussions with our industry partners, optimizing the distribution of limited number of company vehicles while insuring robustness against unlikely vehicle unavailability is of critical importance. Thus in this paper, we present a stochastic mixed integer programming model to optimize the allocation of shared vehicles to employees while taking into account the unforeseen event of vehicle unavailability which would require some participants to take own vehicles or rerouting of existing vehicles. Since solving the proposed model to optimality is computationally challenging for problems of large sizes, we also propose a heuristic that is capable of finding good quality solutions in limited computational time. The proposed model and heuristic are tested on several instances of varying sizes showing the computational performance. Finally, a test case based on the city of Rome, Italy is presented and insights related to vehicle distribution and travel time savings are discussed.     

Foreign participation and competition: A way to improve the container port efficiency in China?

This paper investigates how the involvement of foreign and local ownerships, intra- and inter-port competition and hinterland affect the container terminal efficiency in China and its neighboring countries. The operational efficiency of sample container terminals is estimated by data envelopment analysis, which is followed by regression analysis to examine factors affecting container terminal efficiency. We find that having some Chinese ownership may make a container terminal more efficient, while a container terminal is less efficient with Chinese as the major shareholder. It is also found that intra- and inter-port competition may enhance container terminal efficiency. Finally, the efficiency growth of terminals is examined, and implications for the regional economic disparity in China are discussed.