The Local Public Transport in Italy: Determinants of Cost Structure

The aim of the present study is to provide fresh evidence about the characteristics of cost structure of public transit systems in Italy. The analysis is carried out by comparing the productive performance (average costs and productivity) of small, medium and large-sized companies providing both urban and extra-urban transport service. The sample includes observations of 47 Italian firms operating during the period 1996-1998. In an attempt to analyze the composite nature of costs, we separate components closely related to the physical production of output from those concerning the general organization of transport service and selling activities. The results highlight the role played by input prices and labor and capital productivity in explaining the observed cost differences between companies. The findings also show that inefficiency varies with firm size, network density, the average speed of vehicles and the regulatory context (in terms of the different subsidization mechanisms) that companies have to face.