Productivity changes in Portuguese bus companies
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)
The Technical efficiency of Canadian urban transit systems
Transportation Research Part E
(2004)- et al.
Returns to scale in multi-output production technologies
European Journal of Operational Research
(2009) - et al.
Benefit and distance functions
Journal of Economic Theory
(1996) - et al.
Theory of the firm: managerial behaviour, agency costs and capital structure
Journal of Financial Economics
(1976) A DEA approach for evaluating the efficiency and effectiveness of urban transit systems
European Journal of Operational Research
(2004)Technical efficiency measurement and explanation of French urban transit companies
Transportation Research Part A
(1996)Benefit function and duality
Journal of Mathematical Economics
(1992)The effect of mergers on efficiency and productivity of public transport services
Transportation Research Part A
(2008)- et al.
Analysis of the efficiency of local government services delivery: an application to urban public transport
Transportation Research Part A
(2001) - et al.
The effects of privatization on return to the dollar: a case study on technical efficiency, and price distortions of Taiwan’s intercity bus services
Transportation Research Part A
(2008)