A SURVEY OF RECENT DEVELOPMENTS IN TRANSPORTATION COST FUNCTION RESEARCH

The paper reviews the origins of empirical cost analysis in transporta tion but concentrates on developments over the last 15 years or so. Ag gregate cost functions are studied to infer broad cost characteristics of the industry, notably the presence or absence of economies of scal e or density. Recently the calculation of scale economies is being rec onsidered. If there are interactions among output categories and/or ou tput attributes associated with firm size, there may be cost advantage s to large firms but not because of scale per se. A second purpose of cost functions is to make efficiency comparisons across firms and/or o ver time. The cost function (or productivity index) is decomposed to i dentify the influence of scale, mix of outputs, output attributes, and characteristics of the market environment, to reveal residual efficie ncy differences. Other recent developments reviewed Include: (1) the u se of flexible functional forms (e.g., the translog); (2) output measu rement, output attributes, and hedonic functions; (3) the treatment of fixed inputs in short run cost functions; and (4) the use of ''fronti er'' estimation techniques.