The paper provides an empirical assessment of the contract theory applied to local public transport. Using a panel from the Italian sector, we implement a recently developed DEA-based methodology (Fried et al., 2002), which allows us to disentangle the effects of exogenous factors (i.e. regulation and environmental characteristics), statistical noise and managerial skills on input-specific efficiency differentials across firms. Our contribution to the literature on frontier analysis can be summarized as follows. First, we are able to overcome the main limitations of DEA models, i.e. neglecting the role of stochastic disturbances and non-discretionary factors – such as regulation and network features – outside the managers’ control. Second, we extend previous evidence on the topic (Dalen and Gomez-Lobo, 1997, 2003; Gagnepain and Ivaldi, 2002a,b; Piacenza, 2006) by studying the determinants of productive inefficiency at single-input level. In line with the predictions of the theory of incentives in regulation (Laffont e Tirole, 1993), our findings confirm the efficiency-enhancing impact of fixed-price subsidization schemes as compared to traditional cost-plus contracts. Moreover, the reduction of input wastes exerted by incentive regulatory policies is particularly evident in the usage of drivers and materials and services (mainly related to maintenance and repair activities), that is, those productive factors which are usually supposed to be more sensitive to rationalisation processes, due to the higher degree of asymmetric information between regulator and public transit firm.
Regolamentazione incentivante nel trasporto pubblico locale fra teoria e pratica: quale lezione dallo studio di frontiere di efficienza?
PIACENZA, Massimiliano
2007-01-01
Abstract
The paper provides an empirical assessment of the contract theory applied to local public transport. Using a panel from the Italian sector, we implement a recently developed DEA-based methodology (Fried et al., 2002), which allows us to disentangle the effects of exogenous factors (i.e. regulation and environmental characteristics), statistical noise and managerial skills on input-specific efficiency differentials across firms. Our contribution to the literature on frontier analysis can be summarized as follows. First, we are able to overcome the main limitations of DEA models, i.e. neglecting the role of stochastic disturbances and non-discretionary factors – such as regulation and network features – outside the managers’ control. Second, we extend previous evidence on the topic (Dalen and Gomez-Lobo, 1997, 2003; Gagnepain and Ivaldi, 2002a,b; Piacenza, 2006) by studying the determinants of productive inefficiency at single-input level. In line with the predictions of the theory of incentives in regulation (Laffont e Tirole, 1993), our findings confirm the efficiency-enhancing impact of fixed-price subsidization schemes as compared to traditional cost-plus contracts. Moreover, the reduction of input wastes exerted by incentive regulatory policies is particularly evident in the usage of drivers and materials and services (mainly related to maintenance and repair activities), that is, those productive factors which are usually supposed to be more sensitive to rationalisation processes, due to the higher degree of asymmetric information between regulator and public transit firm.
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