Kofi Obeng

Strategic Planning As an Effective Tool of Strategic Management in Public Sector Organizations: Evidence From Public Transit Organizations

This study determines the effectiveness of strategic planning as an effective tool of strategic management in public transit agencies. It finds that an effective strategic planning requires top managers’ active roles in defining the strategic direction of the organization and creating an environment that recognizes strategic planning as a tool of strategic management. Also, it requires good working relationships between the strategic planning staff, unit or division managers, and the top management team; the location of the strategic planning staff close to top management; integration of unit or division plans into an organization-wide strategic plan; and a planning process that is not too rigid or mechanical. Finally, the article finds that the strategic planning process of an organization must be responsive to environmental changes and challenges.

Motivations and Impediments to Service Contracting, Consolidations, and Strategic Alliances in Public Transit Organizations

This article uses survey data to determine motivations and impediments to collaboration (i.e., contracting, merger/consolidation, and strategic alliance) among public transit systems in the United States. The results suggest that transit systems are more likely to contract out passenger service if they are involved in the initiation of the collaboration effort and if they are motivated by the possibility of increased resources and by government pressure. The impediments to contracting include resistance from other agencies and government funding agency restrictions. Mergers are motivated by cost savings and government initiatives (or pressure). Strategic alliances are motivated by the promise of increased service effectiveness but not so much by service quality, cost savings, or increased resources. An impediment to the formation of strategic alliances is size of required capital investment (cost of vehicles, equipment, and facilities). The article also examines the policy implications of these results.

The Effects of Operating and Capital Subsidies on Total Factor Productivity: A Decomposition Approach

Past studies relied on ad hoc associations to establish relationships between productivity on one hand and operating and capital subsidies on the other. This article deviates from these studies. It builds on recent research based on private cost to derive a total factor productivity formula that includes subsidy effects. It specifies an empirical model to estimate the required parameters to apply the formula. The application to urban transit systems shows that the effects of these subsidies on productivity through technical change reinforce the decline in productivity.

Total factor productivity decomposition, input price inefficiencies, and public transit systems

Abstract This paper decomposes the rate of growth of total factor productivity (TFP) in public transit systems among input demand effects, an indirect output effect, an indirect technical change, pure scale effects and pure technical change. An application of the decomposition to selected transit systems is provided. The application shows that the effects of the changes in input price inefficiencies on TFP are sizeable, and that the total subsidy effects on TFP are larger than the total effects from utility maximization behavior. Furthermore, the traditional sources of TFP (i.e., pure scale and technical change) reduce TFP and the Divisia index overestimates TFP in public transit systems.

PRODUCTIVITY AND PERFORMANCE

The broad aim is to review the technical literature on productivity and performance indicators, and to establish a set of guidelines for improved approaches to the definition, measurement and implementation of indicators. The economic literature on productivity levels and growth rates will be reviewed and contrasted to the more established transport literature on performance indicators. Issues such as scale effects, technical change, traffic composition effects, and density effects will be defined and discussed. Guidelines on essential data and desirable practices for measurement and implementation should be addressed. The broad issue of supply side versus demand side indicators are discussed.

CLASSIFICATION OF BUS TRANSIT POLICY VARIABLES

This paper develops a conceptual model to classify bus transit policy variables based on their effects on the performance levels of the various inputs and total performance measured by the presence or absence of (dis)economies of scale. The four groups of variables identified in the study include those with Strictly positive outcome—these include speed, and the ratio of employer to employee paid benefits. They improve the productivity levels of the inputs which they affect as well as total performance. Mixed effect with positive outcome—local and federal section 3 subsidy availability are the policy variables in this group. Strictly negative outcome—the policy variables in this group are route miles, the ratio of executives, professionals and supervisors, capacity utilization, and the peak base ratio. Mixed effect with negative outcome—those variables in this group are fleet age, state subsidy availability and the number of modes operated. The policy implications of these groups are examined in the paper....

EXPENSE PREFERENCE BEHAVIOR IN PUBLIC TRANSIT SYSTEMS

This paper extends previous works that view transit systems as minimizing their after-subsidy costs. The paper uses the expense preference behavior model in economics and derives first-order conditions for the manager. From the first-order conditions, the paper formally shows that the decomposition of relative price inefficiency between management behavior and subsidies found in the work of Sakano et al. (1997) can be derived from a utility maximizing model, thus placing that decomposition within the shadow price literature. Extensions to the models to calculate expense preference are also presented. The results of the estimated models show that transit systems have expense preference for capital and not labor. This expense preference behavior increases total costs by about 15% and capital subsidies by about 20%.

The Intended Relationship Between Federal Operating Subsidy and Cost

There are many studies, including those of J. Pucher et al. and S. C. Anderson, that found higher costs to be associated with transit operating subsidies. However, none of them investigated the effect of state and local federal subsidy formulas on cost efficiency of transit operations. In this article, the subsidy-cost relationship is derived by using the federal operating subsidy formula directly within the transit firms optimizing framework, and the resulting system of equations is estimated. Our results demonstrate that there exists a positive cost-subsidy relationship that conforms with the previous studies and that the formula results in very little capital bias.

Total factor productivity in transit systems: 1983–1988

Performance in single mode bus transit systems is analyzed in this paper. The paper points to two potential problems in using partial productivity and other measures in assessing the performance levels of transit systems. One solution suggested is total factor productivity which is shown to be mathematically related to many of the traditional measures of performance. Next, total factor productivity is determined using data for a sample of single mode bus transit systems. As part of the analysis, a neoclassical cost function is developed which allows for decomposition of total factor productivity among technical change and economies of scale. The major conclusions include growth of total factor productivity of 1.1% per year and technical growth of 1.14% per year. Growth of total factor productivity is attributed to output, the productivities of all inputs and technical change. Policy implications of these findings are examined.

SPECIFICATION OF A LONG RUN TRANSIT COST FUNCTION TO ESTIMATE INPUT BIAS FROM SUBSIDIES.

The common econometric approach to the study of subsidy impacts on costs does not consider the changes in the ratios of the marginal products of the inputs brought about by the subsidies and which affect the cost function. Instead, this approach includes subsidies as an explanatory variable in the cost function. This paper presents an alternative approach that explicitly considers the changes in the marginal products of the inputs when subsidies are offered and incorporates them directly into a cost function derived by assuming a Cobb‐Douglas technology. This cost function is estimated from a sample of 96 U.S. bus transit systems and the sizes of the inefficiencies from subsidies calculated. It is found that operating and capital subsidies increased costs by a factor of 2.2 and that these subsidies lead to mostly non‐capital bias when a composite measure of noncapital inputs is used. However, there is capital bias when capital is compared to fuel and labour separately. An additional finding of this paper ...