All Clear for Takeoff: Evidence from Airports on the Effects of Infrastructure Privatization

Sabrina T. Howell, Yeejin Jang, Hyeik Kim and Michael Weisbach

No 30544, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Infrastructure assets have undergone substantial privatization around the world in recent decades. How do these assets perform post-privatization? This paper examines global airports. Our central finding is that the type of ownership matters: Volume, efficiency, and quality improve substantially under private equity (PE) ownership—both following privatization and in subsequent transactions—but there is little evidence of improvement under non-PE private ownership. This remains the case for airports sold in auctions in which PE and non-PE firms bid, mitigating concerns about selection. PE owners invest in new physical capacity and appear to negotiate more effectively with airlines, especially in the presence of a state-owned flag carrier. Higher prices and more retail revenue increase net income, with no evidence of cost reductions or layoffs. We find that improvements are concentrated when there is a competing airport nearby, under longer-term leases, and when the local government is less corrupt. One explanation for the failure of non-PE private firms to outperform government ownership is that they tend to target more corrupt locations.

JEL-codes: G32 G38 H54 L32 R42 (search for similar items in EconPapers)
Date: 2022-10
New Economics Papers: this item is included in nep-cfn, nep-reg and nep-tre
Note: CF PE POL PR
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Citations: View citations in EconPapers (1)

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Working Paper: All Clear for Takeoff: Evidence from Airports on the Effects of Infrastructure Privatization (2022)
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