Student transportation: The impact of market structure and school reform on efficiency

This study analyzes how the pupil transportation industry structure and school reform legislation concerning school finance and school choice influence the efficiency of student transportation operations. The student transportation industry is the largest single carrier of passengers in the United States. A few large firms dominate the pupil transportation contractor market in the United States.; The market structure of an industry affects the way that firms operate. Every firm makes production and pricing decisions about what to produce, how to produce it, and for whom to produce the good. The theory of market behavior of oligopolistic firms suggests that when a few firms dominate an industry there may be significant barriers to entry, collusion, and retaliation. The theory can be used to explain the social welfare implications if bus contractors alter their bidding and operating practices as a result of the industry structure.; A variable cost function for pupil transportation was estimated for individual school districts in Minnesota using a cross-sectional data set for the 1999--2000 school year. Economic theory suggests that private contractors might be expected to have more incentive to provide pupil transportation services efficiently than school districts that provide the service in-house. This study, however, found that under current structural arrangements pupil transportation was provided more efficiently in-house in Minnesota. This study provides preliminary evidence which indicated that the major firms in the pupil transportation contractor industry exercise some market power. The results suggest that outsourcing is not a substitute for school district planning and management---whether the service is provided in-house or by a contractor.; This study also analyzed how pupil transportation costs for school districts in Minnesota have been impacted by requirements that upon request they must provide pupil transportation services for charter schools located within the districts' boundaries. The results indicated that variable costs may not be significantly higher for school districts that provided pupil transportation for students who attended charter schools than for districts that did not transport students to charter schools.