Cost-efficiency of buses using stochastic frontier analysis

Abstract

The cost-efficiency of public transport systems is a helpful measure for regulators to establish an effective subsidy mechanism. This study presents a cost-efficiency measurement model of bus routes based on stochastic frontier analysis, taking into account not only heterogeneous outputs but also operating environment factors. In addition, four new operating environment factors that can affect the efficiency of bus routes are introduced. An empirical analysis, based on 39 routes operating in Jiangyin City, China, is presented. It was found that vehicle kilometres have a bigger impact on total operating costs than other parameters such as fixed inputs and fuel price. Operating environment factors such as average bus stop density and the percentage of bus lanes have significant influences on cost-inefficiency differentials. Furthermore, the measurement of cost-efficiency enables identification of the difference between actual total operating costs and efficient total operating costs at a bus route level. The proposed approach could support regulators in setting reasonable cost benchmarks based on efficient total operating costs.