The limits to competition in urban bus services in developing countries

This paper makes the case for the return of regulation in the organization of urban bus services in developing countries. During the past three decades urban public transport policy has transversed several phases. From public ownership and monopoly provision, the eighties and nineties was characterized by liberalization of the sector. The experience of several countries, in particular Chile, indicates that liberalizing the sector may not be the welfare maximizing option. This paper discusses the market failures that justify this claim and presents the regulatory options available in this emerging new role of government. Throughout the paper we illustrate ideas with examples from Chile, Colombia and a few other countries.