Measuring efficiency in the public sector using nonparametric frontier estimators: a study of transit agencies in the USA

Transit agencies in the USA must provide service under increasing operating constraints. Using data from 1989-1993, technical efficiency among these firms is estimated and characteristics indicative of differential efficiency in transit agencies are identified. This paper verifies the robustness of the second step regression results to the choice of efficiency measure by comparing results of the two step regressions using a pair of non-parametric efficiency estimators. It is discovered that the structure of government subsidy to this industry negatively affects not just cost efficiency, but technical efficiency as well. Furthermore, maintenance appears to be an important component of operational efficiency in this industry.