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Indirect production function and the output effect of public transit subsidies

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  • K. Obeng

Abstract

This paper uses an indirect production function to decompose the effects of subsidies on output into the lump-sum, cost and inefficiency effects. Using 2006 data for U.S. transit systems it estimates an indirect production function and uses the results to calculate these effects. It finds that the lump-sum effects exceed the other effects and that the average total effect of the subsidies is a 73.23% increase in output. The range of the output change shows that in many transit systems the subsidies more than double the outputs they produce. The paper suggests that reductions in allocative inefficiencies from the subsidies would result in very large increases in output.
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  • K. Obeng, 2011. "Indirect production function and the output effect of public transit subsidies," Transportation, Springer, vol. 38(2), pages 191-214, March.
    • Handle: RePEc:kap:transp:v:38:y:2011:i:2:p:191-214
    DOI: 10.1007/s11116-010-9296-7
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    1. Obeng, K. & Sakano, R. & Naanwaab, C., 2016. "Understanding overall output efficiency in public transit systems: The roles of input regulations, perceived budget and input subsidies," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 89(C), pages 133-150.
    2. Cinzia Daraio & Marco Diana & Flavia Di Costa & Claudio Leporelli & Giorgio Matteucci & Alberto Nastasi, 2014. "Efficiency and effectiveness in the urban public transport sector: a critical review with directions for future research," DIAG Technical Reports 2014-14, Department of Computer, Control and Management Engineering, Universita' degli Studi di Roma "La Sapienza".
    3. Maria Nieswand & Matthias Walter, 2010. "Cost Efficiency and Subsidization in German Local Public Bus Transit," Discussion Papers of DIW Berlin 1071, DIW Berlin, German Institute for Economic Research.
    4. Sakano, Ryoichi & Obeng, Kofi, 2011. "Examining the Inefficiency of Transit Systems Using Latent Class Stochastic Frontier Models," Journal of the Transportation Research Forum, Transportation Research Forum, vol. 50(2).
    5. 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.
    6. Obeng, K., 2019. "Public transit cost efficiency studies: The impact of non-contracting regulations," Transportation Research Part A: Policy and Practice, Elsevier, vol. 126(C), pages 247-258.
    7. Chen Yan & Qiong Tong, 2021. "Analysis of the Evolutionary Game between the Government and Urban Rail Transit Enterprises under the Loss-Subsidy Mode: A Case Study of Beijing," Sustainability, MDPI, vol. 13(14), pages 1-21, July.
    8. Price, Juan José & Gómez-Lobo, Andrés, 2021. "Baumol’s cost disease and urban transport services in Latin America," Transportation Research Part A: Policy and Practice, Elsevier, vol. 149(C), pages 206-225.

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