Abstract Several theories have been advanced to predict difference in behavior of government-owned vs private firms, such as theories of bureaucratic growth, inefficiency, and concentration on vote-maximizing service with neglect of other important characteristics of service. This study tests the above theories in a declining industry, the U.S. urban bus transify industry of 1960–1975. The analysis bridges the period before and during the major federal capital grant program which was initiated under the Urban Mass Transportation Act of 1964. The empirical results indicate that subsidy at the federal level is associated with higher costs and lower real price and a redistribution of service toward an expanded area, served less frequently. Local and state subsidy is associated with smaller increases in costs and smaller decreases in frequency of service and ridership. The form of public ownership does affect performance, but the unknown size of inter-agency cross-subsidization and tax benefits makes comparison tenuous without case-level investigation. The conclusion is reached that although the bureaucratic growth, inefficiency and vote-maximization theories are supported, inefficiency and bureaucratic growth are associated with passive sponsorship and large size of firm, rather than with public ownership, per se.
The effect of government ownership and subsidy on performance: Evidence from the bus transit industry
Transportation Research Part A: General ; 17 , 3 ; 191-200
1982-10-10
10 pages
Article (Journal)
Electronic Resource
English
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