Persistent and temporary inefficiency in airport cost function: An application to Italy

Gianmaria Martini, Davide Scotti, Domenico Viola and Giorgio Vittadini ()

Transportation Research Part A: Policy and Practice, 2020, vol. 132, issue C, 999-1019

Abstract: We study an airport cost function with a four-random components stochastic frontier model that split the inefficiency in two parts: (1) persistent (long-run) and (2) temporary (short-run). We analyze as determinant of both inefficiency types several exogenous factors such as the airport ownership and LCCs share. We apply the model to the Italian airport system during the period 2010–15. We find that (1) average total cost inefficiency is 14%, and that a it is mainly due to temporary inefficiency, (2) that work load units have the largest cost–output elasticity (+0.31%), (3) that price of airport services has the largest cost-input elasticity (+0.50%) while labor has a +0.41% cost elasticity and capital only a +0.09% cost elasticity. There is also evidence of economies of scale. Moreover we find that LCCs reduce both types of inefficiency and that private airports are more cost efficient than public ones. These findings have interesting managerial (e.g., strictly monitoring service costs, expand LCCs flights) and policy (e.g., provide incentive to reduce temporary inefficiency, push airport privatization) implications.

Keywords: Airport persistent and transient inefficiency; Determinants of inefficiency; Closed Skew Normal stochastic frontier; R41; C23; D24 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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DOI: 10.1016/j.tra.2019.12.016

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