The past few decades have seen transit patronage decrease in all Western countries, including Europe and the United States, lagging far behind the substantial growth in mobility that has occurred during the same period. This is, in-part at least, due to rising levels of real income and the decreasing relative costs of private travel. In addition to these, come large budgetary deficits faced by many countries in recent years necessitating fiscal constraints that have led to a significant reduction in transit subsidization. In an effort to address operational shortcomings and reduce operating deficits, increase productivity, and improve the quality of services, the public transit sector has been moving - in many European countries - away from public ownership and operation and towards private sector participation.

This presentation will discuss three parameters in the transit deregulation/privatization debate:

1. Financial constraints, including budget cuts for transit subsidies, justification for subsidization, and possible solutions.

2. Empirical findings from European Transit Systems. Using data from 38 transit systems in Europe for a 15 year period (1990-2005), we discuss whether the long held hypothesis of the positive effects of privatization on transit efficiency holds true in practice.

3. Factors influencing findings. I argue that the private-public operations debate should be differentiated from other factors also influencing the magnitude – and possibly even the direction - of privatization’s effects on transit efficiency including market structure and competition, contract development and tendering system, and empirical assessment methodology.