Do contractual practices affect technical efficiency? Evidence from public transport operators in China

• The causal effect of contractual practices on the technical efficiency is discussed.
• SFA based on time-varying of trans-log is applied to measure technical efficiency.
• PSM is used to assess the causal effect between them.
• The econometric results corroborate the causal effect between them.

This paper presents a discussion on the causal effect of contractual practices on the technical efficiency of Chinese public transport operators. To test this proposition, an original panel data set covering 47 operators over the period 2008–2013 is used, we firstly estimate the technical efficiency based on the stochastic frontier approach in a time-varying form of the trans-log production function, and then consider a propensity score matching approach to assess the causal effect between them. The econometric results corroborate this proposition that gross cost contracts offer more incentives to technical efficiency than net cost contracts and management contracts.