Cost Efficiency in the Norwegian Bus Industry 1986-96

The Norwegian public transport market has experienced a significant development over the last decade. The number of independent companies has declined from 220 to 83, the two largest groups have through mergers and acquisitions achieved control over more than 40% of the market. In 1991 the competitive pressure become clear throgh legal opening for competitive tendering. Alternative forms of contract have been tried out, but competitive tendering covers only approx 2% of the production. During the period operating unit cost has declined by approx. 20%, the subsidy rate by approx. 1/3 from 37% to 24%, and production has grown slightly. To test hypotheses about factors affecting cost at company and county levels, we have collected accounting and production data for all the companies for the period 1986-96 from Statistics Norway. This pooled time series – cross section data set is used to estimate the effect of contractual form, economies of scale and scope, subsidy levels on cost pr vehicle km, controlling for factors as passenger density, route speed and urban areas. The same data and variables are applied to test hypotheses of market efficiency measured by cost pr passenger km.