Cost Efficiency in Regional Bus Companies: An Application of Alternative Stochastic Frontier Models
This paper evaluates cost and scale efficiencies of Switzerland’s regulated bus companies operating in regional networks. The adopted methodology can be used in benchmarking analyses applied to incentive regulation systems. Moreover, the estimations can be used to evaluate the bidding offers for the tendering processes predicted by the ongoing reform policies. Since these companies operate in different regions with various characteristics that are only partially observed, it is crucial for the regulator to distinguish between inefficiency and exogenous heterogeneity that influences the costs. A number of stochastic cost frontier models are applied to a panel of 94 companies over a 12-year period from 1986 to 1997. The main focus lies on the ability of these models to distinguish inefficiency from the unobserved firmspecific heterogeneity in a network industry. The estimation results are compared and the effect of unobserved heterogeneity on inefficiency estimates is analyzed.
|Date of creation:||Jul 2004|
|Contact details of provider:|| Postal: ETH-CEPE, Zürichbergstrasse 18, 8032 Zürich|
Phone: +41-1-632 06 50
Fax: +41-1-632 16 22
Web page: http://www.cepe.ethz.ch
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Battese, G E & Coelli, T J, 1995. "A Model for Technical Inefficiency Effects in a Stochastic Frontier Production Function for Panel Data," Empirical Economics, Springer, vol. 20(2), pages 325-32.
- Massimiliano Piacenza, 2002. "Regulatory Constraints and Cost Efficiency of the Italian Public Transit Systems: An Exploratory Stochastic Frontier Model," CERIS Working Paper 200202, Institute for Economic Research on Firms and Growth - Moncalieri (TO).
- Kumbhakar, Subal C., 1991. "Estimation of technical inefficiency in panel data models with firm- and time-specific effects," Economics Letters, Elsevier, vol. 36(1), pages 43-48, May.
- William C. Horrace & Peter Schmidt, 2002. "Confidence Statements for Efficiency Estimates from Stochastic Frontier Models," Econometrics 0206006, EconWPA.
- Chambers,Robert G., 1988. "Applied Production Analysis," Cambridge Books, Cambridge University Press, number 9780521314275, December.
- Berechman, Joseph, 1987. "Cost structure and production technology in transit : An application to the Israeli bus transit sector," Regional Science and Urban Economics, Elsevier, vol. 17(4), pages 519-534, November.
- Massimo Filippini & Paola Prioni, 1994. "Is Scale and Cost Inefficiency in the Swiss Bus Industry a Regulatory Problem? Evidence from a Frontier Cost Approach," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 1(2), pages 219-232.
- Wang, Hung-jen & Schmidt, Peter, 2001.
"One-step and two-step estimation of the effects of exogenous variables on technical efficiency levels,"
31075, University Library of Munich, Germany, revised Mar 2002.
- Hung-jen Wang & Peter Schmidt, 2002. "One-Step and Two-Step Estimation of the Effects of Exogenous Variables on Technical Efficiency Levels," Journal of Productivity Analysis, Springer, vol. 18(2), pages 129-144, September.
- Mundlak, Yair, 1978. "On the Pooling of Time Series and Cross Section Data," Econometrica, Econometric Society, vol. 46(1), pages 69-85, January.
- Massimo Filippini & Paola Prioni, 2003. "The influence of ownership on the cost of bus service provision in Switzerland - an empirical illustration," Applied Economics, Taylor & Francis Journals, vol. 35(6), pages 683-690.
- Andrew Street, 2003. "How much confidence should we place in efficiency estimates?," Health Economics, John Wiley & Sons, Ltd., vol. 12(11), pages 895-907.
- Mehdi Farsi & Massimo Filippini, 2004.
"Regulation and Measuring Cost-Efficiency with Panel Data Models: Application to Electricity Distribution Utilities,"
Review of Industrial Organization,
Springer;The Industrial Organization Society, vol. 25(1), pages 1-19, 08.
- Mehdi Farsi & Massimo Filippini, 2003. "Regulation and Measuring Cost Efficiency with Panel Data Models: Application to Electricity Distribution Utilities," CEPE Working paper series 03-19, CEPE Center for Energy Policy and Economics, ETH Zurich.
- Dag Dalen & Andres Gómez-Lobo, 2003. "Yardsticks on the road: Regulatory contracts and cost efficiency in the Norwegian bus industry," Transportation, Springer, vol. 30(4), pages 371-386, November.
- Mehdi Farsi & Massimo Filippini & William Greene, 2004.
"Efficiency Measurement in Network Industries: Application to the Swiss Railway Companies,"
CEPE Working paper series
04-32, CEPE Center for Energy Policy and Economics, ETH Zurich.
- Mehdi Farsi & Massimo Filippini & William Greene, 2005. "Efficiency Measurement in Network Industries: Application to the Swiss Railway Companies," Journal of Regulatory Economics, Springer, vol. 28(1), pages 69-90, 07.
- Greene, William, 2005. "Reconsidering heterogeneity in panel data estimators of the stochastic frontier model," Journal of Econometrics, Elsevier, vol. 126(2), pages 269-303, June.
- Pitt, Mark M. & Lee, Lung-Fei, 1981. "The measurement and sources of technical inefficiency in the Indonesian weaving industry," Journal of Development Economics, Elsevier, vol. 9(1), pages 43-64, August.
- Jondrow, James & Knox Lovell, C. A. & Materov, Ivan S. & Schmidt, Peter, 1982. "On the estimation of technical inefficiency in the stochastic frontier production function model," Journal of Econometrics, Elsevier, vol. 19(2-3), pages 233-238, August.
- Giovanni Fraquelli & Massimiliano Piacenza & Graziano Abrate, 2001. "Costs and Technology of Public Transit Systems in Italy:Some Insights to Face Inefficiency," CERIS Working Paper 200112, Institute for Economic Research on Firms and Growth - Moncalieri (TO).
- Uwe Jensen, 2000. "Is it efficient to analyse efficiency rankings?," Empirical Economics, Springer, vol. 25(2), pages 189-208.
- Aigner, Dennis & Lovell, C. A. Knox & Schmidt, Peter, 1977. "Formulation and estimation of stochastic frontier production function models," Journal of Econometrics, Elsevier, vol. 6(1), pages 21-37, July.
When requesting a correction, please mention this item's handle: RePEc:cee:wpcepe:04-33. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Carlos Ordas)
If references are entirely missing, you can add them using this form.