Public transit subsidies, output effect and total factor productivity

This paper extends previous works on total factor productivity decomposition when firms receive both operating and capital subsidies. It shows that previous works considered either the lump-sum or substitution effects of these subsidies but not together. Using constrained cost minimization as the framework it offers formal proofs to show that cost increases are inevitable if the total effects of the subsidies are considered, and that total factor productivity growth results from increasing amounts of subsidies under economies of scale and in the absence of technical change. Applications of the decomposition equations derived to a sample of transit systems finds near constant returns to scale and negative contributions of these subsidies to total factor productivity growth. Technical change reverses this decline and results in total factor productivity growth. Further, it finds that the lump-sum effects of the subsidies reduce total factor productivity more than does the substitution effect.     

On incentives and optimal effort to improve bus transit performance

ABSTRACT

This paper studies incentive-based subsidy to transit systems to improve performance. It derives a formula for optimal effort that equalizes marginal cost and marginal benefit and derives some principles from it among which is that the larger the value of a transit system’s performance criterion the larger the effort it will exert to improve it. Next, using a constrained cost minimization approach it derives a nonlinear cost function that includes optimal effort and estimates it using an unbalanced panel data of single mode U.S. bus transit systems. The results show that optimal effort is the equivalent of seven full-time employees (15,243 labor hours) per year and in real terms it results in 0.6% cost saving (US$198,331) and US$836,796 in incentive subsidy per observation. The implications of these findings are examined.     

Indirect production function and the output effect of public transit subsidies

This paper uses an indirect production function to decompose the effects of subsidies on output into the lump-sum, cost and inefficiency effects. Using 2006 data for U.S. transit systems it estimates an indirect production function and uses the results to calculate these effects. It finds that the lump-sum effects exceed the other effects and that the average total effect of the subsidies is a 4.72% increase in output. The range of the output change shows that in many transit systems the output increases from the subsidies are quite large. The paper suggests that reductions in allocative inefficiencies from the subsidies would result in very large increases in output.     

Bus ride times of exceptional school children

This paper examines bus ride times of exceptional school children in North Carolina. It uses levels of service data, which show excessive ride times for exceptional school children, to form clusters of local education agencies. From these clusters short term objectives or standards for maximum ride times are determined for each cluster. Among the findings are three distinct clusters of local education agencies (clusters 1, 2 and 3) whose maximum ride times are respectively 170 minutes, 105 minutes and 62 minutes.

The maximum ride times show that only one cluster (cluster 3) provides a service whose maximum ride time is comparable to the ideal maximum ride time (long term objective) of one hour revealed by the literature and also by responses of school superintendents and transportation directors. Methods of achieving these standards are examined. A comparison of the levels of service of regular and exceptional children transportation is also provided.

     

Economies in U.S. demand responsive transit

This paper develops a neoclassical cost function for demand responsive transit (DRT) system and uses it to test the economies of scale hypothesis. The results show economies of scale and further show that the economies can be explained by speed, local and state subsidies, utilization of seating capacity, fleet utilization and an increase in the number of professionals. Comparison of DRT and bus transit results identifies patterns in policy variables whose effects on cost are the same across modes.     

Application of path analysis methodology to transit system maintenance performance

This paper develops a conceptual framework for bus maintenance based on path analysis and applies it to forty-eight bus transit systems. The application determines the total, direct, and indirect effects of the variables identified as having significant causal links with maintenance cost per mile. These variables are identified using the stepwise regression method. The findings are that the wage rate and fleet size increase maintenance cost directly and indirectly. In terms of the standardized regression coefficients, fleet size has been found to be the most important factor affecting maintenance cost per mile, followed by the proportion of articulated buses, the wage rate and local subsidy in that order. The proportion of articulated buses has been found to reduce maintenance cost per mile directly and to increase it indirectly. The indirect path coefficient of the proportion of articulated buses is 0.1794 whereas the direct path coefficient is –0.351. Similarly local subsidy as a proportion of revenue increases maintenance cost per mile directly and reduces it indirectly. The corresponding path coefficients for the direct and indirect effects of local subsidy are 0.2553 and –0.1073. In addition population density and the peak-base ratio are positively and significantly associated with miles between roadcalls. The implications of these findings are briefly examined in this paper. Because the path analysis methodology allows the direct and indirect effects of a causal variable to be determined, it is recommended for policy analysis.