THE COSTS OF BUS OPERATIONS IN NORWAY.

Abstract

The objective of this paper is to reveal the cost structure of the bus industry in Norway by discussing, theoretically and empirically, how total costs per vehicle-kms of a bus company are influenced by: (1) company size; (2) bus size; (3) the number of passengers; (4) the company's working conditions (that is, exogenous characteristics of the compa ny's licence area); (5) the company's ownership structure; and (6) the subsidy procedure with which the company has to work. Our empirical analysis is based on data from all of the 174 bus operators in Norway in 1991. The topics of cost structure and efficiency in public transport have attracted consider able research effort in recent years (see, for example, Diaz, 1982; Berechman and Giuliano, 1985; Winston, 1985; and Oum et al, 1992, for reviews). Much of the workhas been concerned with the properties of economies of scale in bus transit. According to Berechman and Giuliano (1985) and Button (1993), the empirical results regarding economies of scale in the bus industry provide a rather confusing picture, but the majority of the latest works, which use flexible cost models, indicate a U-shaped long-run average cost curve (LRAC -curve); that is, economiesexistuptoacertainpoint, then diseconomies occur.