Limits to competition in urban bus services in developing countries

Abstract

During the past three decades, urban public transport policy has gone through several phases. From public ownership and monopoly provision, the 1980s and 1990s were characterized by a strong liberalization of the sector. This experience showed the limits of liberalization of the sector in terms of safety, prices and accountability. The paper discusses the market failures that justify this claim and the regulatory options available in this emerging new role of government. It illustrates how they are being used in practice in some countries.

Acknowledgements

The authors are particularly grateful to José Gómez‐Ibañez for very extensive comments on an earlier version of the paper and to Andrés Velasco for several productive discussions. They also thank Jose‐Luis Irigoyen, Emile Quinet, Tomas Serebrisky and two anonymous referees.

Notes

Correspondence Address: Antonio Estache, The World Bank, 1818 H. Street, NW, Washington, DC 20433, USA. Email: [email protected]

Another motivation for preferring manual gears might be that they consume less fuel. However, there is no evidence for either hypothesis, although one referee stated that this had also been suggested in the British case.

In the case of congestion, road pricing might be an alternative policy option that does not require the authorities to intervene in the design and management of the public transport system.

Data provided by the Ministry of Public Works, Transport and Telecommunications. Liability issues might also be responsible for this structure. In Chile, bus owners are legally liable only up to the value of their property. This generates incentives to atomize the property of buses. It is common for an entrepreneur formally to spread ownership of his buses among family members.

However, one referee has pointed out that in London, while drivers collect fares on gross contract routes, the proportion of on‐bus fare collection is now zero in the central (yellow) zone and only around 0–2% elsewhere.

The sources for this case study are http://www.idu.gov.co, http://www.transmilenio.gov.co and Hidalgo (2001).

Additional information

Notes on contributors

ANTONIO ESTACHE

Correspondence Address: Antonio Estache, The World Bank, 1818 H. Street, NW, Washington, DC 20433, USA. Email: [email protected]