Cost Structure Changes in the Japanese Local Bus Sector in an Era of Deregulation A Bayesian Gradual Switching Approach

This is the first study to use the Bayes ian grad ual switching regres sion model to inves ti gate the cost structures of local bus oper a tors. The model is able to endog e nously iden tify the start-and end-points of the changes, which makes this model supe rior to mod els with dummy var i ables that assume imme di ate changes. The data from Japan cover 26 years from FY 1987 to FY 2012, including years of announce ment (FY 1996) and enforce ment (FY 2001) of the dereg u la tion. The esti mated start-and end-points of the changes dem onstrate that the changes are due more to the cut ting of labour costs than to dereg u la tion.