Restructuring public transit systems: Evidence on cost properties from medium and large-sized companies

This paper analyses the cost structure of a sample of local public transport companies operating in medium and large urban centres in Italy in order to identify the proper network configuration for the service. Technological characteristics of public transit systems are analysed by estimating both variable and total cost function models. The evidence shows the presence of short-run and long-run economies of scale, as well as of economies of network density. This suggests that a suitable network design should at least include a large urban centre, while a regulatory policy aimed at fragmenting the served area would imply an efficiency loss.