The Impact of Ownership on the Cost of Bus Service Provision: An Example from Piedmont

The paper examines the potential impact of ownership on the cost of bus service provision for a sample of 48 private and 11 public companies providing local public transit (LTP) in Piedmont (Italy) from 1998 to 2002. A translog cost frontier has been estimated using the model in Battese and Coelli (1995) where inefficiency scores are allowed to vary across firms and over time. Two specifications are compared: in the first one the ownership and the type of service supplied by the LPT company directly enter the cost function, while in the second one these variables are able to explain the differences in mean inefficiencies. Data reject the second specification in favour of the first one: public firms and firms supplying only intercity services have a different cost structure. Density and scale economies and cost inefficiencies are then computed. Private companies seem to experience density and scale economies, whereas public ones don’t. Cost inefficiency and estimated average costs appear higher in the public sample.