Subsidy Scheme Analysis.

The case of Urban Public Transport in Córdoba,

Argentina

I. Introduction
This document summarizes the progress of an ongoing research about Cordoba city’s
public transportation subsidy scheme and how to better understand the interactions
between actors in an inflationary context to minimize conflicts. We propose to approach
the problem from a system dynamics perspective (Forrester, 1969) assuming that an
interdisciplinary analysis is central for acquiring a greater and better understanding. We
also aim to include the institutional dimension in the analysis, so that a reference
conceptual framework is available for appraisal and interpretation of motivations behind
the behavior of Cordoba’s public transport system’s actors.

The problem is addressed from the neo-institutionalist perspective proposed by North,

Wallis, Webb and Weingast (2011), based on a hypothesis that states that system actors’
(local government, Transport Worker Union and transport service providers) principal
role is crucial for system dynamics performance and, therefore, for the features attained
by the subsidy scheme within such system.

Two conceptual models were developed within the proposed systemic analysis
framework, which seek to conceptually reflect the nature and dynamic of Cordoba city’s
public transport subsidy scheme1. Main feedback cycles were identified for both
models. Main variables related with subsidies awarded to the public transport system
were identified, together with links that connect them. It is assumed that a systemic
approach allows for a better understanding of how these variables are linked and of the
dynamics wielded on subsidies by this relationships network.
Finally, a set of future lines of research is suggested, aimed at gaining deeper insight of
the problem under analysis.

II. Study case: Córdoba city’s public transportation

The study case belongs to the city of Cordoba, capital of the homonymous province
placed in the central region of Argentina. Its centralized layout where plain areas and
soft grades merge, runs from east to northeast along both margins of the Suquia River
through the municipal administrative limits, a 24 kilometer square with a total area of
576 square kilometers, of which approximately 50% is in rural and industrial land use,
mostly located on the periphery of the district. The central area is medium to high
density, concentrating most business and administrative activities (Fig. 1). A large part
of the city has an orderly grid of streets following the traditional Spanish colonial style.
Córdoba is the second biggest city in Argentina after Buenos Aires, representing an
important cultural, financial, economic and educational center. According to the last
National Population and Housing Census carried out in 2010, the capital city had
1,330,023 inhabitants while the metropolitan area’s population added around 377,000

1
.- The models were plotted using Vensim PLE Plus for Windows Version 6.3E
inhabitants. From a socioeconomic standpoint, in the province of Cordoba, poverty level
estimation reached 26.8 % for December 2013 (Caggia, 2014).
In 2016, Cordoba city’s public transport system had a fleet of 833 buses and 40
trolleybuses with an annual ridership of 182,407,533passengers and a kilometer rate of
3.07 [pas / km]. The system has acceptable headways but slow commercial speed. In
general terms, urban service is characterized by good coverage and accessibility
regarding walking distances, but very low performance during rush hours. The public
transport system is operated under a zonal concession regime. In 2016, there were three
private operators and one state-owned operator who managed trolleybus lines.
Fare structure is composed of a regular fare, a circular service fare, a neighborhood
services fare, a multi-stage fare and a special service fare. The regular fare is a flat fare
for all bus routes that go through the central area. Since December 2016, this regular
fare was $Arg12.55 (approx.U$S0.80).
Córdoba has mobility patterns that resemble those of other Latin American cities, with a
high share of immobile individuals (30.8%), a large share of public transport trips
(34.2%) and a quite low average trip rate (1.74 (trips/person per day). Only 41.6% of
households own a car (Vasconcellos, 2015; Motte-Baumvol & Nassi, 2012; PTUMA,
2011; CAF, 2010).

Figure 1. Córdoba City, Argentina. Based on 2008 Córdoba Census data.

III. A complicated subsidy scheme

Cordoba´s city urban transport operations are funded through a complex network of
subsidy schemes, granted by the three levels of government: municipal, provincial and
national. Some of these subsidies are directly conferred to suppliers while other are
targeted to customers in the way of direct or cross subventions.

A variety of demand targeted subsidies are granted by both the municipal and provincial
governments. In the first place, a flat fare for the entire system, in which passengers
who perform short trips are charged the same rate as those who perform long trips, is
intended to be a cross subsidy. Moreover, multi-stage bus trips add only 25% of the flat
fare. This approach would guarantee satisfactory levels of equity if population
distribution around a central point in space was uniform and according to a decreasing
criterion regarding income levels, which does not happen at all. Central area decay and
wealthy population relocation in the city outskirts interfere with equity purposes
associated to flat rate mechanisms, bringing about serious errors of inclusion.

Considering demand-side subsidies, the local government allotted and paid for a
customer targeted subsidy which consisted of a 10% discount in the ticket value,
financed with municipal budget general revenue funds. This lasted from January 2015
until June 2016 when it was decided that these contributions would be channeled to
transport service operators, thus shifting a grant aimed at users into a direct, not-
conditioned subsidy for supply. A further allocation consists of a two ticket bonus per
passenger, which is paid for during travel card recharging. The user receives a purely
financial benefit mainly intended to ease travel card recharging which is sometimes
difficult in specific city areas or late at night. This subsidy is financed from the transport
system itself through fare collection system income which is paid back to transport
operators on a monthly basis.

Another set of direct demand targeted subsidies was implemented by the Provincial
Government. Easy access to public transport aimed at different population segments is
supported by the province on the basis of disbursements for differential, neither
accumulative, nor transferable fares. Three subsidy programs are in force which are
usually called by their acronyms: BEG, BOS and BAM.2 The former (BEG) is available
to students, teachers and auxiliary personnel from all educational levels who live more
than ten blocks away from the educational center where they study or work,
encompassing 100% of the ticket price. Although this subsidy plays an important role in
providing access to education, it involves serious inclusion errors since it does not take
into account the socioeconomic level of the recipient population. The second program
(BOS) includes workers within the formal economy whose wages are below a certain
category, as well as unemployed citizens. These population categories are granted 50%
of the fare cost for trips to and from work while it leaves out workers in the informal
sector (about 40 %of the city´s labor force), leading to exclusion errors. Inclusion errors
are present as well, as a consequence of underreported wages. The last program funded
by the provincial government (BAM) addresses the elderly, men and women over ages
65 and 60, respectively. The program provides a variable number of free trips per month
depending on income levels, which confers considerable equity to this particular
program.

The subsidies that have been described, although intended to satisfy social demands, are
very often conceived by authorities with governmental marketing purposes while efforts
2
BEG Boleto Educativo Gratuito: Free Student’s and Teacher’s Pass
BOS Boleto Obrero Social: 50% fare reduction for formal workers
BAM Boleto Adulto Mayor: fare reductions for the elderly
to improve system efficiency are lacking. On the other hand, subsidies directed to
supply, are often granted to enable operations continuity, constantly threatened by
workers’ claims and operators’ requirements. Under these circumstances, the local
government arbitrarily subsidizes transport suppliers requiring no prearranged or
regulated quality indicators so that there is little motivation for pursuing better
productivity levels. This discretional manner of grant delivery has favored a tendency to
periodically claim for higher wages, far ahead of inflation figures. With almost no
resistance regarding negotiations from the transport companies’ side, the municipality
confers subsidies with relative ease in order to avoid political costs derived from fare
adjustments and transport strikes, using various funding sources such as general income,
specific fiduciary funds and, eventually, loans from revenue income accrued by the fare
collection company, delivered in advance to transport operators.

Another set of supply-side subsidies is awarded by the national government as part of a

general scheme of subsidy policies, initially intended to freeze fares reducing the burden
of the socioeconomic crisis that took place in the year 2001. A fiduciary fund that had
been created to improve transportation infrastructure, was partially derived to SISTAU 3
which reimbursed transport operators for shortfalls in revenue as a consequence of
frozen fares. By the end of year 2002 the National Government and fuel companies
signed agreements by which the latter were committed to provide transport operators
with diesel fuel at prices below market figures. Fuel liters received by each operator are
computed taking into account the number and type of operating vehicles, as well as
average fuel quantity spent per kilometer and unproductive kilometers and spending.
Reduced diesel oil price assignments require a complex control structure in order to
guarantee a minimum truthfulness regarding supplied services statements.
Since 2004, another compensation (Complementary Provincial Compensation)4came
into force to complement the insufficiency of SISTAU supplied funds, allowing
operators to face the impact of labor costs and fleet reposition. Nowadays, this subsidy
is the most important National Government input for transport systems inside the
country. An idea of national contributions’ size for Cordoba´s city urban transport
system can be appreciated in the following figures: $Arg 69,457,000.00 (U$D
4,424,012) by CCP and $Arg 14,717,000.00 (U$D 937,388) by SISTAU in December
of the year 2016.
IV. Roles of Transport System Actors from a Neo-Institutionalist Point of View
The problem to analyze is enclosed within what North, Wallis, Webb and Weingast
(2011) call limited access orders. This social order concept refers to an organizational
pattern assumed by society to solve political, economic and social systems’ integration
and simultaneous operation.
North et alt. state that such social organizations (which exist in most developing
countries), violence conflicts are solved when political, economic and social elites hold

3
SISTAU: Acronym for “Sistema Integrado de Subsidios al Transporte Automotor”,(Bus Transport
Integrated Subsidy System) supported with 18.5% tax on diesel oil market price.
4
CCP: Acronym for “Régimen de Compensación Complementaria Provincial”, (Complementary
Compensations for Provinces), supported with National Treasure resources.
discretionary control over certain economic resources which entail profits or benefits
that are capitalized by these elites in an exclusive way.
Since uncertainty and violence situations have a negative impact on the capitalization of
these benefits, elites are encouraged to avoid these situations most of the time. In this
context, stability in rents gain and social order control, limits access and competition
within elites’ business fields. In this way, profit creation turns into a cement that bonds
elites, allowing them to credibly commit in order to support the system, reassuring
attained benefits.
Moreover, analyzing transport system actors behavior from North’s standpoint (2001)
on his definition of formal and informal institutions and regulations application
mechanisms, allows a better understanding of the system’s component organizations as
well as of their management elites.
In societies that are characterized by the existence of limited access orders, elites have a
tendency to behave in a voracious manner which leads them to take the maximum
possible advantage of the system supported by their monopolistic position and bystatus
quo breakup threatens (real or potential) which would trigger a violence cycle involving
all actors and damaging available benefits and rents acquisition.
This situation can clearly be seen for the study case, in transport labor union´s behavior,
which is also true for transport providers and the government (local and provincial)
behavior.
In this regard, unexpected or sudden (with no previous notice) strikes and partial strikes
(asambleas) are declared by the transport system labor union, which usually show a
weak resolution will from service operators. Such disagreement situation goes on until
the local government gets involved motivated by the anger of thousands of citizens that
are mobility restrained, with no possibility of finding alternative modes to travel to their
daily activities.

Following North et alt’s (2011) analysis, the central hypothesis lies on the fact that an
implicit alliance exists between the labor union and transport providers, consisting of
periodical disrupt of the system’s operations, seeking for an ever increasing rent (which
confers these actors a predatory character, as was mentioned before). Figure 1 show the
evolution of public transport fare and labor union strike hours per month, between
January 2006 and December 2015. There were 159 strikes computed for this period
which means a total of 1028 hours of strikes.

Since the local government must face a huge political cost every time the labor union
goes on strike, once the conflict starts authorities have no alternative but to call the
parties and commit to find a way out. However, due to both parties poor willingness to
reach an agreement, the usual way out is money transfers that come from local
government resources in the form of supply side subsidies which transport service
providers shall use to satisfy workers’ claims.
Figure 1.Public transport fare evolution and labor union strike hours between January 2006 and December 2015 in Cordoba city.
It is possible to point out that providers also grab an extraordinary rent (expressed in
terms of a lower opportunity cost) by neglecting investments in workers’ “labor
conditions improvement”, while they transfer monetary resources to union
representatives so that the latter will magnify their claims. In this way providers would
be grabbing part of the funds transferred as subsidies, capitalizing them as extraordinary
benefits without translating them into operating costs. This practice (informal
institution) according to North (2001) and to North et al (2011) could be qualified as
“not ethical”.

Last, this dynamic makes local government institutional weaknesses clear, since it
cannot perform a mediator role to make the rest of the actors play under the rules of the
game (summarized in the next section where model dynamics is described). The reason
for this omission is that the local government can’t count on an adequate support for this
purpose neither from the provincial5 government nor from provincial justice6.

V. Systemic Approach for Problem Analysis

A systemic analysis of the problem that was reviewed above, would allow its better
understanding, giving the chance to strengthen decision processes and to improve public
policy design, preventing what Dunn (2007) calls third type errors (EIII), which imply
implementing the right solution for the wrong problem. From this standpoint, the best
possible comprehension of the problem to address, turns into a very important issue.
System dynamics allows us to improve knowledge concerning complex phenomena by
identifying key variables involved, besides the potential relationship existing between
these variables, by specifying the system’s structure and helping to understand its
behavior. Systemic modelling would enable feedback cycles visualization between
variables (both positive and negative), time delay, path dependence existence and
emergent behavior (qualitative news according to Bunge, 2004), built on individual
decisions, defined by Thomas Schelling as micromotives and macrobehaviors (1978).
The conceptual models that are used to analyze the addressed problem, were developed
in a workshop by an interdisciplinary research team (integrated by engineers,
economists and architects), which initially identified the problem’s variable composition
and in the second place, potential links that may exist between these variables.
It is important to point out that there is yet not enough data to run the simulation model
to be based on the proposed conceptual models. Nevertheless, conceptual model
development is regarded as a necessary and important initial step towards the simulation
model’s construction, which should reproduce the dynamic and non-lineal nature of
connections between identified variables.
The reference framework to build the conceptual models was Donella Meadows’ (2008)
and Jay Forrester’s (1969) work.

5
The provincial government’s Ministry of Labor has the necessary legal and administrative tools to call
the parties (in case of conflict) and force them to start a negotiation process, what in legal terms is called a
“compulsory conciliation”, or eventually declare the illegality of a strike, which hardly ever happens.
6
Cordoba province’s Judicial Power has legal resources to punish demonstrators’ violent behavior, (street
closure, public and private heritage destruction), guaranteeing workers’ right to strike and people’s right
to move about freely.
Conceptual Models Description
For a better understanding of the problematic situation analyzed, two models were
developed:
 The Subsidies model (Model I) which encompasses principal variables directly
related with factors that directly impact on the level of subsidies received by
transport service providers.

 The Labor Union Conflict model (Model II) which takes account of main
variables related to factors that directly impact on the dispute level registered by
the Labor Union sector.
The following diagrams summarize models I and II:
Model I: Subsidies

Urban
Land Use - Sprawl
Control + Km Traveled - Number of
+ - Passenger
Transported
+ +
-
Consolidated + Fare -
Fiscal Deficit Subsidies Customer
+ - Satisfaction
- Level
+
- +
+ +
Inflation
Operating
- - + Costs
-
Purchasing +
Power + -

Labor Union
- Service Monopolization
Conflicts
- Degree
-
Local Government - -
Institutional
Capacity
Transport System
+
Provison Regulatory
Framework

Subsidy Model Variables (Model I):

Variables comprised in the Subsidies model are shown below. Each variable is briefly
described to provide a better insight of its meaning.

Subsidies: It encompasses the different types of subsidies described in section III,

comprising both supply-side (SISTAU, CCP, municipal grants) and
demand-side (BEG, BAM, BOS) subsidies. Continuous variable
measured in millions of pesos.
Fare: Cordoba’s transport system’s flat fare value. Continuous variable
measured in pesos.
Consolidated Fiscal Deficit: public accounts deficit at all government levels (national,
provincial and municipal).Its value can increase or decrease. Continuous
variable measured as the difference between public revenue and public
expenditure for each government level.
Inflation: sustained increase in the general price level of goods and services in
an economy over a period of time. Continuous variable measured by
variations7 in the Consumer Prices Index (IPC).
Operating Costs: transport service providers’ costs for operations. Continuous variable
which is measured in pesos.
Purchasing Power: citizens’ purchasing power which is lessened by the IPC’s
variations of which public transport fare value is an important
component. This continuous variable is computed as the difference
between citizens’ percent increase in average income and Consumer
Prices Index increase for the city.
Local Government Institutional Capacity: material, human, administrative,
organizational and legal resources availability within the local
government that enable its functions fulfillment. Continuous variable that
can be measured by an institutional capacity index which takes into
account the above mentioned resource provision.
Transport System Provision Regulatory Framework: current local regulatory/normative
framework compliance. Continuous variable which is measured by a
compliance index of local government requirements.
Services Monopolization Degree: transport services provision concentration degree,
measured by the number of corridors served by the same company. This
continuous variable can be measured by the Herfindhal Index.
Labor Union Conflict: transport system workers’ (UTA)8 level of conflict. Continuous
variable measured by the total number of strike hours steered by the
Public Transport Labor Union that took place monthly, during a certain
period.
Land Use Control: local government actions aimed at activity location regulation and
control (industrial, commercial and residential), in accordance with
current legislation. Dichotomous variable which reflects if the
government performs planning and control activities.
Urban sprawl: urban area growth (expansion). Continuous variable measured in
square kilometers.
Kilometers traveled: Total distance traveled by public transport system vehicles during
service provision. Continuous variable measured in kilometers traveled
annually.

7
IPC Acronym for “Índice de Precios al Consumidor”,Consumer Price Index
8
UTA Acronym for “Union Tranviarios Automotor”, Labor Union for transport workers.
Number of Passengers Transported: Refers to all passengers transported by the system
measured annually. It is a discrete variable.
Customer satisfaction level: User Satisfaction Degree Index (IGS), measured by three
indicators: (i) average waiting time, (ii) average commercial speed and
(iii) standing passenger density.

Model II: Labor Union Conflict

Institutional Capacity of - Citizen Insecurity

Local Government

Operating
Costs
+
+
Labor +
Conditions
+ + Transport
- System’s
- Workers’ Wages
Conflict of Labor
Unions Fares
- +
+ + Inflation +
+ Purchasing - -
Power

+ -
Labor Union (UTA)
Power/Strength Service Provider Claims + + Subsidies
+ +
+
+
Passenger Transport
Conflict-Prone +
Company Federation
Mental Model + (FETAP) Power/Strength

Actors Friction Model Variables (Model II):

Variables that take part in the Actors Friction Model are shown below. As with the
previous model, each variable is briefly described, except those already explained for
Model I.
Citizen Insecurity: Number of criminal acts (assaults, thefts, aggressions) registered
against public transport drivers. Discrete variable.
Labor Conditions: Public transport drivers’ labor conditions, reflected by clothing
availability, working schedule compliance, bathrooms in line end points,
etc. Dichotomous variable.
Transport System’s Workers’ Wages: major component of urban transport’s costs
structure (67,8% of the total cost9). Continuous variable measured in
thousands of pesos.

9
Average value based on the redetermination of the bus ticket value. Ordinances approved by the City
Council for the period 2012-2016.
Service Provider Claims: requests arisen from transport service providers seeking to
gain fare increments to be paid by service customers and/or further
government (at all three levels) granted subsidies, which usually involve
labor union turmoil. Discrete variable measured by the number of times
FETAP demands the authorities for fare adjustments or for more
subsidies.
Labor Union (UTA) Power/Strength: Labor Union organizational capacity and ability
to exert political/social pressure. Continuous variable computed by the
difference between Union fostered salary percent increase and inflation
rate.
Passenger Transport Company Federation (FETAP)10 Power/Strength: Transport
Company Federation organizational capacity and ability to exert
political/social pressure. Continuous variable computed by the difference
between fare percent increase and inflation rate.
Conflict-Prone Mental Model: Labor Union tendency to declare sudden or unexpected
strikes, with no previous visible negotiations with the employer
federation or with the local government.

V.1. Model I “Subsidies” Dynamics Description

The Subsidies model seeks to provide a concise analysis of variables linked to subsidies
conferred to Cordoba city’s public transport system.
This model shows that subsidies awarded to the transport system by the national,
provincial and local governments, directly depend on transport operating costs
registered by service providers in addition to fare levels fixed by the local government.
Operations costs increments result in greater pressure to increase system fares to be
followed by higher grants.
Moreover, an increase in subsidies means higher consolidated government spending in a
period dominated by fiscal deficits at all levels of government. In a context of
restrictions on capital account due to legal problems between the Argentine State and
public debt holders in default, the growing fiscal deficit was financed through an
expansionary monetary policy which generated inflationary pressure (the correlation
coefficient between monetary base growth and the price index for the period 2010-2016
is 0.9873, significant at 1%). All these issues result in a triple consequence: (i)
population income’s purchasing power deterioration, (ii) an increase in transport
providers’ operating costs, and (iii) a greater level of conflict in the system.
In addition, fare increases to be paid by system customers, generate a deterioration of
their purchasing power, which may mean a smaller number of trips11so that a reduction

10
FETAP: Acronym for” Federación de Empresarios del Transporte Automotor de Pasajeros”, public
transport operators’ federation.
11
The demand for public transport in Cordoba has an income-elasticity of an inferior good and a price-
elasticity of less than 1. Both factors, in a context where demand has significantly increased by demand-
specific subsidy schemes (seniors, students), have generated that the number of passengers transported
has grown despite the fact that the ticket value has increased at a higher rate than inflation in recent years
in the number of passengers carried by the system would be expected. Another effect of
fare value’s rise is further claims for wage increases that can be seen in a higher level of
union unrest.

Union unrest level is defined in the model by purchasing power loss (generated by
inflation rate increases), greater system operating costs (reflected in lower levels of
investment in maintenance of transport units and workers' working conditions) and by
the local government’ institutional capacity (see previous section), since a greater
availability of administrative, legal and human resources allows for, on the one hand,
adequate regulatory frameworks (clearly defined formal institutions) that reduce
conflict generation, and on the other hand to deal with and resolve early trade union
disputes.

In institutional terms, the model assumes that adequate provision of local government
resources to formulate transport policies, strengthens the government’s capacity to
establish a legal framework that defines the rules of the game within which the main
actors of the system must play. This has a triple effect: (i) it impacts on companies’
operating costs (clear and simple rules of the game mean lower operating costs),(ii) it
limits monopolization levels in service provision, which in turn affects the operational
costs of service provider companies (a higher level of business concentration can reduce
certain operating costs, such as maintenance, administrative and financial costs among
others), and (iii) it establishes conditions for service provision that may result in higher
user satisfaction levels.

Also, the local government’s institutional capacity has a direct impact on land use
planning and control policies (activity location inside the territory, mixed land uses,
etc.), which in turn determine urban area sprawl through authorizations for changing
rural land into urbanized land and new requirements for infrastructure networks.

The expansion of the urban area implies the need to provide transport services to
previously uninhabited areas. Kilometers traveled growth to cover longer distances has
an impact on providers’ operational costs with the above-mentioned consequences and
in the number of passengers carried by the system. It is important to note that urban
sprawl could lead to a higher car dependency, since more families live in neighborhoods
with low accessibility (Riera, Lucca, Brusa, Falavigna&Taborda, 2016).

On the other hand, the number of passengers carried is a variable that depends
positively (directly) on user satisfaction levels and negatively (inversely) on fare value
and population’s purchasing power. It is necessary to point out that although the public
transport service is characterized by a negative income elasticity (that is to say that an
increase in population’s income level means lower trips demand),in the case of Cordoba
city, this is true for high and high average income households, but not for those with
low and middle incomes (which make up the bulk of the population), for whom an
increase in their income entails the possibility of making more trips.

V.2. Model II “Labor Union Conflict” Dynamics Description

The Labor Union Conflict model was developed to conceptually represent a number of
issues from the neo-institutionalist approach described in section IV. This model seeks
to make a representation of labor union conflict specificity, including into the analysis
variables that are not reflected by the more general analysis performed for the Subsidies
Model.

The proposed model shows that labor union conflict is dependent on seven variables:

(i) local government’s institutional capacity which, as was already mentioned, refers
to resources availability which strengthen and make feasible its chances to
mediate and solve labor union demands and arguments (it is assumed that better
institutional capacities indicate less labor union conflict).

(ii) system workers’ labor conditions (better working conditions mean lower conflict
levels)
(iii) transport system labor union (UTA) power for imposing its demands (a stronger
capacity for demand fulfillment implies a greater labor union conflict level)

(iv) labor union and transport service providers’ mental model which directly impacts
on labor union conflict levels (a mental model where demands are posed by means
of strikes and partial strikes (asambleas), imply a greater conflict level).

(v) service provider claims, fed by the mental model providers ascribe to, through
service provider empowerment (two variables with a positive feedback), by
inflation (measured by the Consumer Price Index) and by system operation costs
increase, so that more service provider claims mean greater labor union conflict
levels.

(vi) transport system personnel purchasing power which is in turn negatively

influenced by inflation and positively influenced by workers’ wages rise (a greater
purchasing power means lower labor union conflict levels).

(vii) public insecurity, which is in turn influenced by local government institutional

capacities, as long as local capacity for policy formulation and application reduces
insecurity levels in certain dangerous city areas (these insecurity levels, revealed
by robberies, assaults and violence acts against bus drivers, increase labor union
conflict levels).

At the same time, system workers’ perceived wage increments imply cost operations
rises for service providers. When this is added to inflation levels the outcome is a
greater claims level from the employers’ side. The latter are channelized, on one hand,
by a greater labor union conflict level and on the other hand, by requests for higher fares
and subsidies, while these two variables are inversely related, whereby fare rise means
less demand for subsidies and vice versa.

The models allows us to observe the presence of numerous feedback cycles, both
positive (system destabilize cycles) and negative (system stabilizing cycles). Cycles
identified in both models, indicating variables involved and their nature, are listed in the
Appendix.
As a synthesis, it is possible to point out that in Model I Subsidies, 43 feedback cycles
(24 positive and 19 negative) were identified, while in Model II Labor Union Conflict, 5
cycles (4 positive and 1 negative) were identified.
The importance of identifying these cycles lies on the fact that the whole system’s
dynamic is based on their existence, generating a macro behavior that is characterized
by the presence of emergent properties (defined by Bunge, 2004) as qualitative
innovations with global, non-distributive properties that result from the interrelation of
the system´s components) and are as Forrester (1971) points out, counterintuitive.
VI. Conclusions
The article presents partial results of an ongoing research conducted in the National
University of Cordoba.12

This document attempts to describe and characterize the study problem, providing a
framework of analysis with a neo-institutionalist viewpoint so that the behavior of
Cordoba’s city public transport main actors is reflected. The conceptual model that was
developed, integrates the city’s urban transport variables from a systemic standpoint.

Problem analysis from a neo-institutionalist perspective gave an opportunity to

highlight some service provision restrictions caused by the performance logic of the
system’s main actors (labor union, service providers and local government), and the
way by which this individual logic creates incentives that influence other system actors’
behavior.

Through systemic interpretation of Cordoba city’s public transport subsidies dynamics,

the aim was to integrate a wide range of variables (organizational, political, economic,
special and social) which revealed the existence of several feedback cycles (positive and
negative). These cycles have an influence on the problem that sheds a particular
dynamic (different cycles would be more or less dominant on different moments)
The convergence of both conceptual approaches (systemic and neo-institutionalist) has
allowed us to highlight the following:
 Local government authorities (responsible for guaranteeing an adequate public
transport service provision) face a very complex taskwhen trying to modify the
system’s dynamics which is explained by factors that are beyond their control.

 The significant number of feedback cycles that were identified in Model I (a

total of 43), suggests that the analyzed system has a strong autonomous behavior
and a final condition that results from cycle interaction and coexistence

 Twenty six of the 43 feedback cycles that were identified in the proposed model,
include the variable Local Government Institutional Capacity. This shows its

12
This research titled “Urban Transport Subsides in the city of Cordoba. Distributive Issues Appraisal
Simulation Model” is certified and financed by the Secretaría de Ciencia y Tecnología de la Universidad
Nacional de Córdoba (SECyT Resolution 202/16).
 relevance and the important part it plays for the success of any kind of strategy
that is intended for the system’s dynamics manipulation.
Approaching reality from a systemic perspective, makes it easier to visualize the
problems "immersed" in the context of other problems, and to be able to perceive the
existence of networks of problems. Understanding such networks prevents us from
thinking in terms of "isolated problems", thus increasing the likelihood that in the search
for solutions, we will generate new problems or worsen existing ones.
Finally, future research should focus on proposed conceptual model improvement on the
light of new evidence or another available information, as well as data search and data
generation aimed at proposed variable value assignment and at the development of the
simulation model.

VII. Bibliography

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 Appendix
Feedback Cycles Model I

FeedbackNumber Associated Variables FeedbackSign

Subsidies:
1
Fare (+)
Subsidies:
Consolidated Fiscal Deficit
2
Inflation (+)
Operating Costs
Subsidies:
Fare
3 Purchasing Power (+)
Labor Union Conflict
Operating Costs
Subsidies:
Consolidated Fiscal Deficit
4 Inflation (-)
Operating Costs
Fare
Subsidies:
Consolidated Fiscal Deficit
Inflation
5
Purchasing Power (+)
Labor Union Conflict
Operating Costs
Subsidies:
Consolidated Fiscal Deficit
Inflation
6
Purchasing Power (-)
Number of Passenger Transported
Fare
Subsidies:
Fare
Purchasing Power
Labor Union Conflict
7
Institutional Capacity of the Local Government (-)
Transport System Provision Regulatory
Framework
Operating Costs
Subsidies:
Consolidated Fiscal Deficit
Inflation
8 Purchasing Power (-)
Labor Union Conflict
Operating Costs
Fare
Subsidies:
Fare
Purchasing Power
9 Labor Union Conflict (+)
Institutional Capacity of the Local Government
Transport System Provision Regulatory
Framework
 Degree of Monopolization of Transport Services
Operating Costs
Subsidies:
Consolidated Fiscal Deficit
Inflation
Purchasing Power
10
Labor Unions Conflict (-)
Level of User Satisfaction
Number of Passenger Transported
Fare
Subsidies:
Consolidated Fiscal Deficit
Inflation
Operating Costs
11
Conflict of Labor Unions (-)
Level of User Satisfaction
Number of Passenger Transported
Fare
Subsidies
Consolidated Fiscal Deficit
Inflation
Purchasing Power
12 Conflict of Labor Unions (+)
Institutional Capacity of Local Government
Transport System Provision Regulatory
Framework
OperatingCosts
Subsidies
Fare
Purchasing Power
Conflict of Labor Unions
13 Institutional Capacity of Local Government (-)
Land Use Control
Urban Sprawl
Km Traveled
Operating Costs
Subsidies
Consolidated Fiscal Deficit
Inflation
Purchasing Power
Conflict of Labor Unions
14
Institutional Capacity of Local Government (-)
Transport System Provision Regulatory
Framework
Degree of Monopolization of Transport Services
Operating Costs
Subsidies
Consolidated Fiscal Deficit
Inflation
Purchasing Power
15 Conflict of Labor Unions (-)
Institutional Capacity of Local Government
Transport System Provision Regulatory
Framework
Operating Costs
 Fare
Subsidies
Consolidated Fiscal Deficit
Inflation
Purchasing Power
Conflict of Labor Unions
16 Institutional Capacity of Local Government (+)
Transport System Provision Regulatory
Framework
Degree of Monopolization of Transport Services
Operating Costs
Fare
Subsidies
Consolidated Fiscal Deficit
Inflation
Purchasing Power
Conflict of Labor Unions
17
Institutional Capacity of Local Government (+)
Land Use Control
Urban Sprawl
Km Traveled
Operating Costs
Subsidies
Consolidated Fiscal Deficit
Inflation
Purchasing Power
Conflict of Labor Unions
18
Institutional Capacity of Local Government (-)
Land Use Control
Urban Sprawl
Number of Passenger Transported
Fare
Subsidies
Consolidated Fiscal Deficit
Inflation
Operating Costs
Conflict of Labor Unions
19 Institutional Capacity of Local Government (-)
Transport System Provision Regulatory
Framework
Level of User Satisfaction
Number of Passenger Transported
Fare
Subsidies
Consolidated Fiscal Deficit
Inflation
Purchasing Power
Conflict of Labor Unions
20 Institutional Capacity of Local Government (-)
Transport System Provision Regulatory
Framework
Level of User Satisfaction
Number of Passenger Transported
Fare
 Subsidies
Consolidated Fiscal Deficit
Inflation
Operating Costs
Conflict of Labor Unions
21
Institutional Capacity of Local Government (-)
Land Use Control
Urban Sprawl
Number of Passenger Transported
Fare
Subsidies
Consolidated Fiscal Deficit
Inflation
Purchasing Power
Conflict of Labor Unions
22 Institutional Capacity of Local Government (-)
Land Use Control
Urban Sprawl
Km Traveled
Operating Costs
Fare
Operating Costs
23
Conflict of Labor Unions (+)
Operating Costs
Fare
24
Purchasing Power (+)
Conflict of Labor Unions
Operating Costs
Conflict of Labor Unions
25 Institutional Capacity of Local Government (+)
Transport System Provision Regulatory
Framework
Operating Costs
Conflict of Labor Unions
Institutional Capacity of Local Government
26
Transport System Provision Regulatory (-)
Framework
Degree of Monopolization of Transport Services
Operating Costs
Conflict of Labor Unions
Institutional Capacity of Local Government
27
Land Use Control (+)
Urban Sprawl
Km Traveled
Operating Costs
Fare
Purchasing Power
28 Conflict of Labor Unions (+)
Institutional Capacity of Local Government
Transport System Provision Regulatory
Framework
Operating Costs
29 Fare (-)
Purchasing Power
 Conflict of Labor Unions
Institutional Capacity of Local Government
Transport System Provision Regulatory
Framework
Degree of Monopolization of Transport Services
Operating Costs
Fare
Purchasing Power
Conflict of Labor Unions
30
Institutional Capacity of Local Government (+)
Land Use Control
Urban Sprawl
Km Traveled
Conflict of Labor Unions
31
Institutional Capacity of Local Government (+)
Conflict of Labor Unions
Institutional Capacity of Local Government
32
Transport System Provision Regulatory (+)
Framework
Conflict of Labor Unions
Level of User Satisfaction
33 Number of Passenger Transported (+)
Fare
Purchasing Power
Conflict of Labor Unions
Institutional Capacity of Local Government
Transport System Provision Regulatory
Framework
34
Level of User Satisfaction (+)
Number of Passenger Transported
Fare
PurchasingPower
Conflict of Labor Unions
Institutional Capacity of Local Government
Land Use Control
35 Urban Sprawl (+)
Number of Passenger Transported
Fare
PurchasingPower
Fare
36
Number of Passenger Transported (+)
Fare
37 Purchasing Power (+)
Number of Passenger Transported
Fare
38 Level of User Satisfaction (+)
Number of Passenger Transported
Fare
Purchasing Power
39 Conflict of Labor Unions (-)
Operating Costs
Subsidies
Urban Sprawl
40
Km Traveled (+)
 Operating Costs
Fare
Purchasing Power
Conflict of Labor Unions
Institutional Capacity of Local Government
Land Use Control
Purchasing Power
Conflict of Labor Unions
Operating Costs
41
Subsidies (+)
Consolidated Fiscal Deficit
Inflation
Purchasing Power
Conflict of Labor Unions
Institutional Capacity of Local Government
Transport System Provision Regulatory
42
Framework (-)
Operating Costs
Subsidies
Fare
Institutional Capacity of Local Government
Transport System Provision Regulatory
Framework
Degree of Monopolization of Transport Services
43
Operating Costs (-)
Fare
Purchasing Power
Conflict of Labor Unions

FeedbackCyclesModel II

FeedbackNumber Associated Variables FeedbackSign

Conflict of Labor Unions
1 Transport System’s Workers’ Wages (-)
Purchasing Power
Conflict of Labor Unions
Transport System’s Workers’ Wages
2
Operating Costs (+)
Business Claims
Labor Union (UTA) Power/Strength
3
Conflict -Prone Mental Model (+)
Conflict -Prone Mental Model
4 Passenger Transport Company Federation (+)
(FETAP) Power/Strength
Subsidies
5
Fare (+)