Abstract
The objective of this paper is to ease the planning of new toll projects by providing estimates of operating costs, and to help us make better informed decisions about the design of toll collection systems. To do so we use panel data for Norwegian toll companies to estimate average cost functions. The main results can be summarised as follows. We provide evidence of very important unexploited economies of scale. The estimated cost curves are very steep for traffic levels below the sample mean, and become almost entirely flat over a wide range above the sample mean. A higher share of vehicles using on board units will significantly reduce average costs. Competitive tendering will significantly reduce average operating costs by as much as 25%. Our results also suggest that increased number of lanes, higher debt and passenger charging will increase average operating costs whereas average operating costs are lower for toll cordons compared with other projects.
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Notes
1 \({\hbox{NKr}\approx 0.15}\) $
The present paper extends the analysis in Welde (2005).
Although there is very little literature on operating costs in the toll industry, our empirical approach is closely related to a wider literature on estimating cost functions for public enterprises. Andrews et al. (2002) provide a survey of studies analysing economics of scale in education, Hammond (1999) estimate cost functions for public libraries, Torres and Morrison Paul (2005) report results for the US water industry, and Jørgensen et al. (1995) investigate the costs of bus operation in Norway.
The figure is based on total operating costs divided by total revenues for all Norwegian toll projects. The data is collected from the NPRA’s database of costs and revenues in the toll companies.
In Norwegian cost benefit analyses a standard shadow price of public funds of 1.2 is used.
Larsen (1995) uses a similar expression.
As one could argue that average costs decreases as toll companies gather experience and introduce more efficient organizational solutions, we also included variables measuring the number of years since the opening of the project. However, the estimated effects were statistically insignificant.
These conclusions are based on tests with a two-sided alternative. With a one-sided alternative, all estimates except the effect of passenger charging have p-values below 0.05 whereas the p-value of PC is 0.061.
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The paper is a result of cooperation between the Norwegian Public Roads Administration (NPRA) and Centre for Economic Research at the Norwegian University of Science and Technology (NTNU). The project is initiated and financed by the NPRA. We would like to thank seminar participants at the Department of Economics at NTNU and the National Conference on Economic Research 2006 for helpful comments.
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Amdal, E., Bårdsen, G., Johansen, K. et al. Operating costs in Norwegian toll companies: a panel data analysis. Transportation 34, 681–695 (2007). https://doi.org/10.1007/s11116-007-9122-z
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DOI: https://doi.org/10.1007/s11116-007-9122-z