Worse than Baumol's disease: The implications of labor productivity, contracting out, and unionization on transit operation costs

Abstract

Worse than Baumol's disease: The implications of labor productivity, contracting out, and unionization on transit operation costsThe MIT Faculty has made this article openly available. Please share how this access benefits you. Your story matters.

Outsourcing Public Services: Contractibility, Cost, and Quality

“…Several studies of public and student transportation have been conducted in recent years, although quality measures are generally sparse. Most of the studies report cost savings from outsourcing (Roy and Yvrande-Billon 2007;Iseki 2010;Walter 2011;Sarriera et al 2018). Among these studies, Iseki ( 2010) is perhaps the most credible one, attempting to address the endogeneity of contracting using a comparably large panel.…”

“…Zullo ( 2008) is another credible panel study which finds that demand response contracting is associated with lower costs than in-house operations, whereas motor bus services exhibit the same costs for both modes of production. Sarriera et al (2018) use a large bus-transit agency panel and find that contracting out reduces unit cost, but not cost growth. They also find that private production cost savings are larger when there is some public production.…”