Excess Capacity and the Economics of Public Transit Investment: A Study of a Growing American City

Abstract

Declining ridership in public transport weakens the case for investments in expanded service or large investments in public transit infrastructures. Our study documents the decline in public transit ridership in Nashville, Tennessee, USA. Using data from Federal sources for 2002-2018 we document the influence of higher numbers of hours of bus service, employment, and, gasoline prices on public transit ridership. We find a surprising negative relationship between ridership and miles of bus service provided. Given the several control variables in the model, quadratic trend estimates inform us that peak ridership occurred in 2007 and the seasonally adjusted ridership might be falling since then. A second regression for the period after the great recession of 2008-09 gives a similar result regarding the declining ridership. Falling ridership in Nashville matches downward trends in other cities around the country. A major contribution of our study lies in the identification of separate roles for hours and miles of bus service. Using that insight, we decompose the time series while incorporating a quadratic trend to account for relative changes in the slope over time. Evidence of an underlying downward trend in ridership challenges the value of making large scale investments in transit capacity especially in the presence of increasing excess capacity.