Elsevier

Transport Policy

Volume 17, Issue 5, September 2010, Pages 295-302
Transport Policy

Productivity changes in Portuguese bus companies

https://doi.org/10.1016/j.tranpol.2010.02.003Get rights and content

Abstract

This paper proposes a framework for benchmarking Portuguese bus companies and the rationalisation of their operational activities, using the Luenberger productivity indicator. A key advantage of this method is that it allows for both input contraction and output expansion in determining relative efficiencies and productivity changes. For comparative purposes, a Malmquist index is also estimated. The Malmquist index overvalues the Luenberger productivity indicator. Results indicate that public bus companies have similar efficiency to private bus companies. Several interesting and useful managerial insights and policy implications arise from the study.

Introduction

Efficiency at the level of the enterprise is a major issue in contemporary European economics, due to the ever more intense pressure that competition exerts on prices. Over the last decade or so, a growing literature, using a variety of approaches, has emerged dealing with the issue of productivity in bus companies (Pina and Torres, 2001; Odeck, 2003; Holvad et al., 2004; Jorgensen et al., 1995, Jorgensen et al., 1997).

Bus companies usually operate in a defined geographical area and compete with other forms of transportation as well as with other bus companies (Odeck and Alkadi, 2001). Generally, the European evidence suggests that bus companies achieved productivity growth during the 1990s, although the rate of growth varied across countries. Roy and Yvrande Billion, 2007 related the productivity growth in the French bus industry to the outsourcing of the public transport at municipal level. Karlaftis and McCarthy (1997) adapted the DEA model to analyse the US transit system. See a survey in De Borger et al. (2002); for a meta-analysis, see Brons et al. (2005).

This paper aims to extend the established literature on bus transportation productivity by applying the Luenberger indicator (Chambers, 1996) to estimate and decompose productivity change. For comparative purposes, a Malmquist index is also estimated. Earlier studies of bus productivity tend to employ non-parametric techniques and Malmquist productivity indexes (Malmquist, 1953). The Luenberger indicator is a difference-based index of directional distance functions, whereas the Malmquist index is a ratio-based measure.1,2 Luenberger (1992) introduces the shortage function, which has the desirable properties of accounting for both input contractions and output improvements and establishing duality between the shortage function and the profit function (Chambers et al., 1998). Thus, the indicator can accommodate either an input or output perspective corresponding to cost minimisation or revenue maximisation. We employ the Luenberger productivity indicator of Chambers (1996) to estimate productivity change and its constituents for a sample of Portuguese bus companies between 1995 and 2008.

The remainder of the paper is organised as follows: Section 2 presents the context; Section 3 is devoted to the literature review; Section 4 presents the methodological framework; the data and results are presented in Section 5; finally, Section 6 is devoted to the discussion and conclusion.

Section snippets

Background

There are 122 urban transport companies in Portugal, most of which are small regional operators. They are organised in the transport network (www.transpor.pt), a public organisation for transportation information overseen by the government, with the aim of informing the market on the availability of transport at national level and organised by types of transport (bus, train, underground, ship and plane). Bus companies are also members of ANTROP—the national association of bus transport (//www.antrop.pt

Literature review

There has been relatively extensive research into the bus industry using a variety of methods (Jara-Dias and Gschwender, 2003). Restricting the survey to frontier models, we can see that there are some papers that use the non-parametric DEA model, whilst others papers use the parametric econometric frontier (De Borger et al., 2002). The variability in the use of inputs and outputs in transit technology specifications has been reviewed by De Borger et al. (2002) and Karlaftis (2004).

The

Methodological framework

This section introduces the assumptions on the production possibility set and the methods used to estimate the components of productivity.

In proposing new, more flexible, measures involving production theory, Chambers et al., 1996, Chambers et al., 1998 introduced the “directional distance function”,3 which is the transposition in production theory of Luenberger’s (1992) “benefit function” in a consumer

Data and results

A data set on the 1000 largest enterprises in Portugal, measured by sales, published yearly by a major Portuguese daily newspaper, Diário de Notícias was adopted for the present research, with a data span ranging from 1995 to 2008. Information regarding bus companies was collected and complemented with information obtained from the balance sheets of the companies.

We construct efficiency and productivity measures for bus companies assumed to produce two outputs: (i) sales, and (ii) passengers,

Discussion and conclusion

A Luenberger productivity indicator is used to estimate and decompose productivity growth on a sample of Portuguese bus companies between 1995 and 2008. Furthermore, for comparative purposes, a Malmquist index is presented. This data was used previously by Barros (2005) for the period 1995–2003, employing a stochastic frontier analysis. With the present set of results, using an alternative productivity measure can confirm the consistency of both methodological approaches. According to the

Acknowledgements

We would like to thank two anonymous referees for useful comments and suggestions. Any remaining errors are solely due to the authors.

References (55)

  • AdCapita and Cranfield University, 2003. Can Portuguese Managers Compete?, Mimeo, available at...
  • R.D. Banker et al.

    Nonparametric analysis of technical and allocative efficiency in production

    Econometrica

    (1988)
  • C.P. Barros

    Estimating the efficiency of the Portuguese bus industry with a Stochastic cost frontier model

    International Journal of Transport Economics

    (2005)
  • B.M. Balk et al.

    Exact relations between Luenberger productivity indicators and Malmquist productivity indexes

    Economic Theory

    (2008)
  • M. Brons et al.

    Efficiency of urban public transit: a meta analysis

    Transportation

    (2005)
  • J.P. Boussemart et al.

    Luenberger and Malmquist productivity indices: theoretical comparisons and empirical illustration

    Bulletin of Economic Research

    (2003)
  • Briec, W., 1995. Une nouvelle approche de la mesure de l’efficacité productive. Ph.D. Thesis, EHESS,...
  • W. Briec

    A graph-type extension of the Farrell technical efficiency measure

    Journal of Productivity Analysis

    (1997)
  • Chambers, R.G. 1996. A new look at exact input, output, and productivity measurement. Department of Agricultural and...
  • R.G. Chambers

    Exact non-radial input, output, and productivity measurement

    Economic Theory

    (2002)
  • R.G. Chambers et al.

    Profit, directional distance functions, and Nerlovian efficiency

    Journal of Optimization Theory and Applications

    (1998)
  • J. Cowie et al.

    Organisational form, scale effects and efficiency in the British bus industry

    Transportation

    (1999)
  • D.M. Dalen et al.

    Yardsticks on the road: regulatory contracts and cost efficiency in the Norwegian bus industry

    Transportation

    (2003)
  • B. De Borger et al.

    Public transit performance: what does one learn from frontier studies?

    Transport Review

    (2002)
  • G. Debreu

    The coefficient of resource utilization

    Econometrica

    (1951)
  • Diewert, W., 1998. Index number theory using differences rather than ratios. Department of Economics Discussion Paper...
  • W. Diewert

    Productivity Measurement Using Differences Rather Than Ratios: A Note. School of Economics Discussion Paper 2000/1

    (2000)
  • Cited by (0)

    View full text