Make or Buy Urban Public Transport Services: A Rational Choice?
Make or Buy Urban Public Transport Services: A Rational Choice?
Make or Buy Urban Public Transport Services: A Rational Choice?
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Considering the quality of the data available and the variety of provision modes,<br />
we decided to go a step further in the analysis of the determinants of <strong>or</strong>ganisational<br />
choices and we proceeded to an estimation assuming that the variable Organization i<br />
is a qualitative variable, not an <strong>or</strong>dered one. The <strong>or</strong>dered logit specication includes<br />
indeed several restrictions 14 . One imp<strong>or</strong>tant is that the unobserved fact<strong>or</strong>s (ɛ i ) that<br />
tend to shift <strong>or</strong>ganizational choices from direct provision to semi-public contracting<br />
also inuence the shift from semi-public contracting toward private contracting. This<br />
is not the case in a multinomial logit model where unobserved fact<strong>or</strong>s are assumed to<br />
be unc<strong>or</strong>related. In this model, the probability that the local auh<strong>or</strong>ity i provides the<br />
service through mode j is given by :<br />
P r {Organization i = j} = exp(X iβ j )<br />
∑ 3l=1<br />
, j = 1, 2, 3. (3)<br />
exp(X i β l )<br />
where X i is a vect<strong>or</strong> of economic and non-monetary determinants of service provision<br />
choices. The results based on this specication are provided in columns 2 and 4 of<br />
table 3. Not only do these results conrm our central propositions regarding the economic<br />
motives of <strong>or</strong>ganisational choices but they also provide m<strong>or</strong>e precision on the<br />
eect of each variable on the choice of arrangements open to local auth<strong>or</strong>ities. Indeed,<br />
models 2 and 4 indicate that an increase in service complexity is associated with a shift<br />
away from private contracting toward in-house provision but not toward semi-public<br />
contracting. Similarly, Uncertainty i and Size i appear as explanat<strong>or</strong>y variables of<br />
the trade-o between in-house provision and private outsourcing but do not intervene<br />
in the trade-o between semi-public outsourcing and private outsourcing. At last,<br />
Cities i is found to be a signicant determinant in model 3 but not in model 4, which<br />
suggests that the number of cities covered by a netw<strong>or</strong>k is only a determinant of the<br />
shift away from semi-public contracting to in-house provision.<br />
In the end, what these estimates reveal is that the trade-o between in-house provision<br />
and private outsourcing is dictated by economic fact<strong>or</strong>s such as the level of<br />
complexity of the service, the degree of demand uncertainty and the potential f<strong>or</strong><br />
competition. But these variables do not explain the choice of semi-public contracting.<br />
Impact of non-monetary determinants. Results of our estimates indicate that<br />
the rate of unemployment of a city is not a signicant determinant of the <strong>or</strong>ganizational<br />
choices made by its local government regarding urban transp<strong>or</strong>t. A possible<br />
explanation is that legislation f<strong>or</strong> utilities industries does not give private operat<strong>or</strong>s<br />
a large room of leeway as regards their number of employees. Theref<strong>or</strong>e, private outsourcing<br />
may not be considered as threatening the level of employment in the transp<strong>or</strong>t<br />
14 The err<strong>or</strong> in applying an <strong>or</strong>dered model to a non-<strong>or</strong>dered variable is much higher than the converse<br />
(Maddala 1983).<br />
20