Local public transportation firms: the relevance of scale and scope economies in the provision of urban and intercity bus transit

Using a panel of local public transport companies, four different cost specifications are compared. The standard translog and the generalized translog specifications give unreliable estimates with respect to scope economies because of the degenerate behaviour of such functions when outputs are set to zero. The separable quadratic and the composite models allow the direct handling of zero outputs and they better fit the data. Moderate global scope economies are estimated from the preferred specification (0.2%), but splitting global scope economies into its two components, it is found that large fixed cost savings can be obtained from joint production (6.3%). Density economies and modest scale economies are also detected for the median firm in the sample.