Make or Buy Urban Public Transport Services : A Rational Choice?

Make or Buy Urban Public Transport Services: A Rational Choice?
Miguel AMARAL & Anne YVRANDE-BILLON (CES, Université Paris 1 Panthéon-Sorbonne)
Abstract: In this article, our aim is to study the determinants of the trade-off between in-house and outsourced utilities provision.  More precisely, we focus on the French urban public transport sector.
With regard to the issue we are interested in, this case is a particularly rich domain since, in France, the local authorities in charge of regulating the procurement of urban public transport services can choose between direct provision and outsourcing.  In this latter case, they even have an additional option since they can contract out the operation of service either to semi-public companies or to fully private firms.
Using an original database covering 154 different French urban transport networks, we estimate the impact on organisational choices of network and service characteristics (size of the network, population density, level of demand uncertainty) and institutional dimensions (legal status of local regulators, percentage of other services already outsourced, technical competencies of the local regulator, political orientation).
Our results allow shedding light on the economic rationale behind the choice of a mode of governance.  Indeed, although most of the interpretations of the organizational decisions made by local governments in utilities sectors concentrate on political factors, we show that there are rooms for economic explanations.
JEL codes: H0, H7, L33.
Keywords: Public/private provision, Urban public transport.
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