Some Determinants of Cost Efficiency in German Public Transport

Abstract

This paper evaluates cost efficiency and some of its managerial determinants in Germany’s local public transport. A heteroscedastic Stochastic Frontier approach reveals that a high degree of tramcar utilisation and a high outsourcing degree influence the efficiency predictions positively. Mean efficiencies lie between 0.849 and 0.952, depending on the applied panel data models accounting for unobserved heterogeneity and observed heterogeneous output variables for tram, light railway and metro services. The inefficiency levels correspond to a savings potential between 1.40 and 4.43 bn EUR based on the 28.23 bn EUR total costs (in 2006 prices) for 254 observations of 39 companies 1997-2006.