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The Deadweight Costs of Operating and Capital Subsidies

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  • Obeng, Kofi

Abstract

This paper determines the deadweight loss of operating and capital subsidies by extending Tullock’s (1998) work. It finds that when both subsidies are received deadweight loss is 6.83% of total cost or $0.861 million on the average, $0.780 million when operating subsidy is received and $0.0503 million when capital subsidy is received. Decomposing the deadweight loss using regression shows that the incentive tier of the federal operating subsidy, federal labor protection, fleet size, and the number of maintenance facilities owned are positively associated with it while leasing maintenance facilities and absence of dedicated funding sources are negatively associated with it.

Suggested Citation

  • Obeng, Kofi, 2010. "The Deadweight Costs of Operating and Capital Subsidies," Journal of the Transportation Research Forum, Transportation Research Forum, vol. 49(1).
    • Handle: RePEc:ags:ndjtrf:207182
    DOI: 10.22004/ag.econ.207182
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    References listed on IDEAS

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    1. Obeng, K. & Sakano, R., 2008. "Public transit subsidies, output effect and total factor productivity," Research in Transportation Economics, Elsevier, vol. 23(1), pages 85-98, January.
    2. Kofi Obeng & Golam Azam, 1995. "The Intended Relationship Between Federal Operating Subsidy and Cost," Public Finance Review, , vol. 23(1), pages 72-94, January.
    3. K. Obeng & R. Sakano, 2000. "The Effects of Operating and Capital Subsidies on Total Factor Productivity: A Decomposition Approach," Southern Economic Journal, John Wiley & Sons, vol. 67(2), pages 381-397, July.
    4. van Dijks, Mathijs A. & van Bergeijk, Peter A. G., 1997. "Resource misallocation and mark-up ratios: an alternative estimation technique for Harberger triangles," Economics Letters, Elsevier, vol. 54(2), pages 165-167, February.
    5. Brian A. Cromwell, 1989. "Capital subsidies and the infrastructure crisis: evidence from the local mass-transit industry," Economic Review, Federal Reserve Bank of Cleveland, vol. 25(Q II), pages 11-21.
    6. Solís, Liliana & Maudos, Joaquín, 2008. "The social costs of bank market power: Evidence from Mexico," Journal of Comparative Economics, Elsevier, vol. 36(3), pages 467-488, September.
    7. Obeng, K., 2000. "Expense preference behavior in public transit systems," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 36(4), pages 249-265, December.
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    Cited by:

    1. Obeng, K. & Sakano, R., 2020. "Effects of government regulations and input subsidies on cost efficiency: A decomposition approach," Transport Policy, Elsevier, vol. 91(C), pages 95-107.
    2. K. Obeng, 2011. "Indirect production function and the output effect of public transit subsidies," Transportation, Springer, vol. 38(2), pages 191-214, March.
    3. Amihai GLAZER & Stef PROOST, 2008. "Capital-intensive projects induce more effort than labor-intensive projects," Working Papers of Department of Economics, Leuven ces0831, KU Leuven, Faculty of Economics and Business (FEB), Department of Economics, Leuven.

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