Paratransit services, contracting‐out and cost savings for public transit firms: a firm specific analysis

Abstract

Facing actual competition and potential competition from internally provided paratransit and contracted‐out paratransit services, respectively, unionized transit labor of a public transit firm may feel threatened (i.e. in terms of potential job losses) and may agree to changes in costly work rules as well as to wage concessions. If so, the transit firm will incur cost savings in the provision of its transit service as a result of providing paratransit and contracted‐out paratransit services (i.e. in becoming a multiservice firm). This paper provides theoretical and empirical evidence to support such cost savings. The literature suggests that such cost savings may exist; however, to the knowledge of the author, the literature has not provided evidence of their existence.