The impact of ownership on the cost of bus service provision: an example from Italy

The paper examines the potential impact of ownership on the cost of bus service provision for a sample of 65 private and 12 public companies providing local public transit (LTP) in Piedmont (Italy) from 1998 to 2002. A translog cost frontier is estimated using the model in Battese and Coelli (1995) where inefficiency scores are allowed to vary across firms and over time. A public ownership dummy is included in the inefficiency model and it is always positive and significant pointing to higher inefficiencies for public companies. Density and scale economies and cost inefficiencies are then computed. Private companies seem to experience higher density and scale economies than public ones. Cost inefficiencies appear higher in the public sample.