Analysis of the Allocative Efficiency in Public Firms: the Case of Railway

Pablo Coto-Millán, José Baños and Ana Rodríguez-Alvarez
Additional contact information
Pablo Coto-Millán: University of Cantabria
Ana Rodríguez-Alvarez: University of Oviedo

Chapter 5 in Essays on Transport Economics, 2007, pp 79-96 from Springer

Abstract: 5.11 Summary and Conclusions This paper discusses whether a public firm such as RENFE satisfies the cost minimization condition. Through the estimation of the shadow prices of the production inputs we obtain the grade of the firm’s allocative inefficiency and its origin. The methodology used is based on the estimation of a Shephard distance function for the input, the dual of the cost function, which fully represents the technology and is valid for multiproduct and multifactor firms, with which the shadow prices of the inputs may be obtained making unnecessary the use of their market prices. From the results obtained in this paper, it may be verified that shadow prices are different to market prices and, therefore, the public firm RENFE does not use the productive inputs in the optimal proportion, that is, it does not minimize costs in relation to the market prices. It may be observed that the capital input is being over-utilized in relation to energy, whereas labour is being over-utilized in relation to the rest of the inputs.

Keywords: Distance Function; Ordinary Little Square; Market Price; Input Price; Shadow Price (search for similar items in EconPapers)
Date: 2007
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:conchp:978-3-7908-1765-2_6

Ordering information: This item can be ordered from
http://www.springer.com/9783790817652

DOI: 10.1007/978-3-7908-1765-2_6

Access Statistics for this chapter

More chapters in Contributions to Economics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().