COST STRUCTURES OF PUBLIC TRANSIT SYSTEMS: A PANEL DATA ANALYSIS

This paper explores whether public transit production technology differs by size and operating characteristics of the transit system. Previous cost studies have generated conflicting results on public transit production technologies because they have employed various sub-samples of public transit properties. The diverse results from these studies may either reflect alternative technologies or sampling differences. The analysis presented in this paper is unique because rather than focusing upon a relatively small subset of public transit firms, this study includes nearly all transit systems reporting for Section 15 (U.S. National Transit Data) purposes from 1986 to 1994. Results indicate that U.S. transit properties are heterogeneous with different production technologies, which implies that transit cost analyses based upon a set of heterogeneous systems will generate incorrect inferences on public transit costs and production structures. Whether own price elasticities for inputs, elasticities of substitution between inputs in the production of public transit or scale economies are examined, there will be differences in these measures by size of public transit firm. Consistent with expectations, the largest systems operated with the greatest returns to capacity utilization and have the highest estimated average cost of production