Privatisation of urban bus services in Spain

Abstract

This paper analyses the industry of urban bus services in Spain. The objective is to study whether there are differences between firms' performances resulting from public or private ownership. As significant differences are observed in a first descriptive approach, a second step is to evaluate whether a change of ownership could be socially optimal. A translog cost function is estimated, which provides information about technology and it is then used to evaluate the individual performance of each firm. Finally, a cost-benefit analysis is carried out, showing that large social gains could be obtained by privatising public firms, especially if accompanied by a reduction of long-term contracts in the industry.