JPAM Featured Article: Public and Private Production
March 22, 2016 11:00 AM
" Public and Private Production in a Mixed Delivery System: Regulation, Competition, and Costs"
As part of our ongoing effort to promote JPAM authors to the APPAM membership and the public policy world at large, we are asking JPAM authors to answer a few questions to promote their research article on the APPAM website.
By: Gerrmà Bel and Jordi Rosell
What was the genesis/history of the idea for your research?
In the last years, different strikes in the public bus company in Barcelona -TMB- called our interest to find out about its performance. We realized that within the same local jurisdiction where TMB operates, there are several private firms operating on different concessions. This public-private concurrence in the same jurisdiction is called mixed delivery. Thanks to the data we could obtain, we have been able to compare costs of public and private operators in the metro area of Barcelona.
What is the main conclusion that becomes evident from your research? (Or, what is our main takeaway?)
In the metro area of Barcelona, the costs of public delivery are lower than costs of private delivery. We also find evidence that operating under tendering procedures implies cost savings in the private segments of the service. However, savings from tenders are not large enough to offset higher costs incurred by private firms when compared to public delivery. This public-private cost gap is increased when we consider transaction costs, as they reflect the costs paid by the citizens to maintain the regulator. By including transaction costs, we are able to obtain a more robust comparison of public and private delivery costs.
What are some of the more interesting or surprising findings/conclusions, you discovered during this process?
Comparisons of public and private delivery of urban transport services across jurisdictions usually find better cost conditions with private operators. Hence, our finding that the public firm shows better performance was not the result that we expected to obtain a-priori. In this way, this research shows that our hypothesis that mixed delivery is expected to provide balanced costs between public and private providers is partially confirmed. This system seems to discipline the public firm, but only partially contains costs by the private ones. As such, mixed delivery may have contributed to cost containment in the public firm through a threat of privatization, given that private providers are easily available in the jurisdiction. This might help to explain TMB's relatively good economic performance when compared to the private firms in Barcelona. On the other hand, the fact that the public firm cannot bid for concessions in the metro area of Barcelona limits competition. Thus, allowing TMB to compete for concessions could help to decrease costs by improving competition.
What next steps do you envision should be taken because of your findings academically and/or practically?
In this research we analyze a specific service within a specific jurisdiction. Further empirical studies of mixed delivery in other services could enhance our knowledge of its advantages and drawbacks. The different combinations of situations can lead to a interesting knowledge, and provide a broader view of mixed delivery, for scholars and also for policy makers and public managers.
Gerrmà Bel (Twitter: @gebelque)
Gerrmà Bel is professor of Economics in the Department of Econometrics, Statistics and Applied Economics at the University of Barcelona. His main research areas are public sector reform and policy analysis and evaluation. Currently, he is conducting research on environmental and mobility policies, infrastructure policies and local public services. For more information, see http://www.ub.edu/gim/ca/membre/germa-bel/
Jordi Rosell (Twitter: @jordi__rosell)
Jordi Rosell is a Lecturer in the Department of Econometrics, Statistics and Applied Economics at the University of Barcelona. His current research focuses on evaluation of environmental and mobility policies. His other research interests are local government and Public Sector Reform. For more information, see http://www.jordirosell.com