TOTAL FACTOR PRODUCTIVITY DECOMPOSITION, INPUT PRICE INEFFICIENCIES, AND PUBLIC TRANSIT SYSTEMS
ridership - demand, economics - economies of scale, mode - mass transit
Utility maximization, Transit, Total factor productivity, Subsidies, Public transit, Productivity, Production rate, Prices, Mass transit, Local transit, Input output models, Economies of scale, Economic analysis, Demand, Decomposition (Economics), Costs
An alternative decomposition of total factor productivity (TFP) in public transit systems is provided that accounts for the price inefficiencies from input-specific subsidies and utility maximization, and determines which of them causes the major changes in TFP. The decomposition considers the following sources of TFP: input demand effect, indirect output effect, and indirect technical change all from subsidies and utility maximization. An application of the decomposition to selected transit systems is provided. The decomposition application shows that the effects of the changes in input price inefficiencies on TFP are sizeable, and that the total subsidy effects on TFP are larger than the total effects from utility maximization behavior. When the productivity impacts of the changes in these inefficiencies are considered, the overall effect on TFP is positive. Also, the sizes of the TFP calculated with this decomposition formula are smaller than those based upon the Divisia index measure. Other sources of changes in TFP are the pure scale effect and the pure technical changes which are not induced by the input price inefficiencies from subsidies and utility maximization and which are the traditional sources of TFP.
Obeng, K, Sakano, R, (2002). TOTAL FACTOR PRODUCTIVITY DECOMPOSITION, INPUT PRICE INEFFICIENCIES, AND PUBLIC TRANSIT SYSTEMS. Transportation Research Part E: Logistics and Transportation Review, Volume 38, Issue 1, p. 19-36.