Performance-based transit subsidy allocation scheme to fulfill multiple policy criteria

Abstract

ABSTRACT Performance-based subsidy allocation schemes are typically intended to satisfy a single policy goal (e.g. social welfare maximization) and often do not include objective approaches to quantifying bus service efficiency. This paper proposes a framework for network data envelopment analysis and introduces an innovative transit subsidy allocation scheme with a fixed budget that fulfills multiple policy criteria. The proposed basic scheme minimizes the maximum deviation from efficient allocation in proportion to the operating scales across all routes in a two-stage production system. Multiple policy criteria are then added to the basic scheme as additional goal components. The proposed scheme is evaluated by using an empirical dataset of 344 subsidized intercity bus routes collected from 20 Taiwanese bus operators. The results demonstrate that the subsidies allocated on the basis of the proposed scheme can satisfy the policy criteria incorporated into the scheme. The proposed modeling framework is flexible, and therefore, local governments can easily incorporate policy criteria into the scheme according to their own interests and needs.