Assessing standard costs in local public bus transport: Evidence from Italy

We estimate a regression model for the determination of standard costs in the Italian local public bus transport system. We consider quantitative and qualitative characteristics, which contribute to explain the variability of the cost structure of services provided. Economic and transport data have been collected from companies producing more than 500 million of service-kilometers. We find that commercial speed is the most important cost driver, while economies of scale are low and only present in the case of small basins. Results highlight a positive correlation between investments in bus fleet and the cost incurred for the provision of the service. Finally, the model aims at introducing policy constraints in order to impose regulatory requirements in the use of the results for the allocation of public funds earmarked to the local public transit sector among Italian regions.