Thursday, January 26, 2012

Privatizing Student Transportation in MN INCREASES Costs

New on SSRN: The Estimated Cost Impact of Privatizing Student Transportation in Minnesota School Districts, by Owen Thompson (UMASS Amherst - Department of Economics)

Student transportation makes up a substantial portion of a typical school district’s operating budget, and sub-contracting bus service to private firms has been advanced by some as a way to reduce transportation costs. Previous studies have found conflicting evidence regarding the cost impact of privatization. This paper seeks to improve on previous studies by estimating cost equations using data that spans six school-years. The primary result is that privatization acts to substantially increase transportation costs. Estimates using a pooled cross section predicted that going from fully outsourced to fully in house reduced costs by approximately 15.8%.