Public–private efficiency in the delivery of services of general economic interest: The case of urban transport

Abstract

This paper studies urban transport, a public service with extensive initiatives towards deregulation and privatisation throughout the European Union and in other developed and developing countries. The relative merits of deregulation, public or private provision and the implications of different policies for the performance of public services have become important issues. A crucial question is what type of operating and regulatory environment is best suited to stimulate efficiency in public service delivery. This paper analyses specifically the effect of privatisation and deregulation on the technical efficiency of bus services in 73 cities, in order to compare performance in cities with bus services provided by public operators, private operators, both types simultaneously or in which the service is deregulated. The behaviour of the different types of operators analysed in this paper shows that competition – total or partial – is effective in controlling costs.

Notes

1 For example, in October 1998 I tabled Sale of One-third of Telstra, Audit Report No.10 (1998–1999). The audit concluded that, as an essential element of the outsourcing of project management for future Commonwealth public share offers, overall value for money could be improved by giving greater emphasis to financial issues when tendering for advisers; encouraging more competitive pressure on selling commissions and fees; paying fees only for services actually provided; and instituting a more effective and commercial approach to administering payment for shares by investors.

2 Defined as: Total operating costs of bus urban transport in the city by all operators. This indicator has been used by: Cervero (1983), Tone and Sawada (1990), Chu et al. (1992) and Wunsch (1994). This indicator is considered by Talley and Becker (1982), Nash (1980) and Patton (1983) as the best urban transport efficiency indicator.

3 Defined as the total annual bus urban transport fuel consumption in the city. This indicator has been used by: Fielding et al. (1985), Chang and Kao (1992), Levaggi (1994), Sakano and Obeng (1995), Kerstens (1996, 1999), Nolan (1996), Sakano et al. (1997), Costa (1998), and Pina and Torres (2001).

4 Defined as: ‘Total annual investment spending (depreciation) on public transport, excluding direct operating expenses’. This indicator has been used by: Hanusch and Cantner (1991), Filipini et al. (1992), Fazioli et al. (1993), Levaggi (1994), and Loizides and Giahalis (1995).

5 Defined as the total annual number of kilometres travelled by every bus vehicle on revenue service runs in the city. This indicator has been used by: Miller (1970), Fielding et al. (1985), Viton (1986, 1992, 1993), Tone and Sawada (1990), Chang and Kao (1992), Obeng (1994), Wunsch (1994), Sakano and Obeng (1995), Kerstens (1996, 1999), Nolan (1996), Costa and Markellos (1997), Sokano et al. (1997), Matas and Raymond (1998), Viton (1998), Button and Costa (1999).

6 Defined as the total number of annual bus urban transport revenue seat-kilometres (only sitting places are counted). This indicator has been used by: Nollet et al. (1988), Gathon (1989), Hanusch and Cantner (1991), Thiry and Tulkens (1992), Filipini et al. (1992), Tulkens (1993), Fazioli et al. (1993), Levaggi (1994), Tulkens and Wunsch (1994), Wunsch (1994), Tulkens and Vanden (1995), Kerstens (1996, 1999), and Button and Costa (1999).

7 Defined as the total annual bus urban transport boarding (unlinked trips) in the city. This indicator has been used by: Levaggi, 1994.

8 Defined as the total annual number of kilometres travelled by all the passengers in the city. For Hensher and Damiels (1995) there are ideally two demand-side measures of output: passengers or passengers/kilometres. This indicator has been used by: Cervero (1983), Fielding et al. (1985), Levaggi (1994), Bhattacharyya et al. (1995), Loizides and Giahalis (1995), Kerstens (1996, 1999), Kumbhakar and Bhattacharyya (1996), Lijesen (1998), and De Jong and Cheung (1999).

9 Defined as the average 24-hour, 7-day bus urban transport commercial operating speed. This indicator has been used by: Levaggi (1994) and Nolan (1996).

10 Defined as the number of employed people at the place of work and not the labour force.