Cost Disease in Tehran Bus Transportation Sector

A higher growth rate of the service sector prices, rather than prices in the manufacturing sector, through time, is known as cost disease in the service sector. In most countries, the annual rate of increase in the price of the service sector is more than goods sector over time. It is suggested first time (Baumol, 1967), known as Cost of Disease. The aim of this paper identifies the cost disease in the urban bus transportation sector in Tehran. We use Boumol’s (1967), Oulton’s (2001), and Sasaki’s (2007) model, the result show that cost disease in the urban bus transportation sector occurred and this sector was stagnant. The explosive cost, may to deal with the budget deficit in the urban bus transportation sector in Tehran. The growth rate of productivity in the urban bus transportation sector is smaller than in the manufacturing sector, and this gap is a "failure market". Therefore, Tehran Municipalities should help to urban bus transportation sector equal to this productivity gap