Ask: NUS Economists

Why Govt should use subsidies to encourage more to take public transport

A Economists generally support public transport subsidies for three reasons: supply-side economies of scale, demand-side economies of scale, and the decrease in negative externalities from less car use. Our recent research studied how important these factors are in Singapore's transport system.

Economies of scale refer to production processes in which average cost falls as the quantity produced rises. This is true of public transport because it has very high fixed costs of operations.

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A version of this article appeared in the print edition of The Straits Times on February 11, 2020, with the headline 'Why Govt should use subsidies to encourage more to take public transport'. Subscribe