The allocation of national public resources in the Italian local public bus transport sector

Local public transport (LPT) operators typically operate at a deficit and require economic compensation from public authorities. In some countries, public funds are provided both at a national (centralized) level and at a regional (decentralized) level. Thus, a proper distribution of such funds should be based on the costs of an efficient operator and a methodology that does not build differential inefficiencies across regions. In this process, the Italian industry reform requires that the main criterion of historical costs currently applied to allocate national public resources among Local Authorities should be gradually overcome in favor of principles that encourage efficiency. We propose an operative methodology to apply standard costs in the allocation of national public resources available for the local public bus transport services to Regions and, in turn, to Local Authorities. Moreover, we perform simulations to illustrate the impact of this methodology in terms of reallocation of national public resources among Local Authorities. Based on certified data, results of this paper fill a severe knowledge gap and support (i) policy makers when it comes to allocate public resources, as well as competition authorities in their market assessment and scholars aimed at investigates this prominent topic.