Economies of scale and scope in local public transportation

TLDR

The study examines the cost structure of Swiss urban public transport to evaluate scale and scope economies. A multi‑output cost function was estimated using panel data from companies operating trolley‑bus, motor‑bus, and tramway systems. Results indicate increasing returns to scale and significant scope economies, supporting integrated multi‑mode operation over unbundling and informing policy reforms in European transport markets.

Abstract

This paper analyses the cost structure of the Swiss urban public transport sector in order to assess scale and scope economies. A multi-output cost function has been estimated for a panel data set of companies operating trolley-bus, motor-bus and tramway systems. The results suggest increasing returns to scale and economies of scope. This analysis has important policy implications in view of the ongoing reforms in several European countries in which competitive tendering is occasionally used to assign the provision of transport services to unbundled franchised monopolies. The significant scope economies provide some evidence in favour of integrated multi-mode operation as opposed to unbundling.