Public Transit Bus Procurement: The Role of Energy Prices, Regulation and Federal Subsidies
The U.S. public transit system represents a multi-billion dollar industry that provides essential transit services to millions of urban residents. We study the market for new transit buses that features a set of non-profit transit agencies purchasing buses primarily from a few domestic bus makers. Unlike private vehicles, the fuel economy of public buses is irresponsive to fuel price changes. To understand this finding, we build a model of bus fleet management decisions of local transit agencies that yields testable hypotheses. Our empirical analysis of bus fleet turnover and capital investment suggests that transit agencies: (1) do not respond to energy prices in either their scrappage or purchase decisions; (2) respond to environmental regulations by scrapping diesel buses earlier and switch to natural gas buses; (3) prefer purchasing buses from manufacturers whose assembly plants are located in the same state; (4) exhibit significant brand loyalty or lock-in effects; (5) favor domestically produced buses when they have access to more federal funding.
We thank Ed Glaeser, David Levinson, Ben Leard, Ian Savage, Duncan Watry and seminar participants at Arizona State University and the National University of Singapore, University of Chicago, Texas A&M and the University of Wisconsin at Madison for useful comments. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
Li, Shanjun & Kahn, Matthew E. & Nickelsburg, Jerry, 2015. "Public transit bus procurement: The role of energy prices, regulation and federal subsidies," Journal of Urban Economics, Elsevier, vol. 87(C), pages 57-71. citation courtesy of