The Economic Benefits from Competition in Bus Public Transport - The Israeli Case

Abstract

The impact of public bus transportation competition in Israel six years after its 2000 introduction is evaluated in this paper. A detailed analysis is presented on competition's impact on ridership, level of service, and fare for each line cluster put out for tender. There is estimation of competition's contribution to the national economy in terms of long-term subsidy savings and service costs, as are consumer surplus changes. The government subsidy to public transportation has so far been reduced by competition by NIS 95 million, while it has created an estimated NIS 120 million increase in consumer surplus. Together, these figures represent 7% of total service cost pre-competition. Tendering resulted in an actual real cost per bus-kilometer savings range of 18%-46%. There was a 7%-58% ridership increase range in most competition clusters.