Abstract
THIS PAPER DEVELOPS A NEOCLASSICAL COST FUNCTION FROM CROSS-SECTIONAL DATA PERTAINING TO SIXTY-TWO BUS TRANSIT SYSTEMS. THE COST FUNCTION IS USED TO STUDY THE EFFECTS OF TOTAL FACTOR PRODUCTIVITY AND INPUT SUBSTITUTION ON COST. IT IS CONCLUDED THAT LABOUR AND FUEL PRODUCTIVITY IMPROVEMENTS ARE IMPORTANT ACTIONS TO REDUCE AVERAGE COST, AND IN TERMS OF EFFICIENCY OF OPERATIONS THAT LONG-RUN SCALE DISECONOMIES ARE FOUND IN ALL TRANSIT SYSTEMS. SUCH GENERAL CHARACTERISATION IS NOT POSSIBLE IN THE SHORT RUN. FOR EXAMPLE, WHILE BUS SYSTEMS OPERATING MORE THAN FIFTY VEHICLES HAVE SHORT-RUN ECONOMIES OF DENSITY, THOSE OPERATING LESS THAN FIFTY VEHICLES HAVE DISECONOMIES OF DENSITY.(Author/publisher).