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Effects of Inefficiency on Marginal Costs, Degree of Economies of Scale and Technical Change: A Theoretical Relationship. The Case of Spanish Port Authorities || Efectos de la ineficiencia sobre los costes marginales, el grado de economías de escala y el cambio técnico: una relación teórica. El caso del sector estibador español

Author

Listed:
  • Díaz-Hernández, Juan José

    (Department of Economics, Accounting and Finance. University of La Laguna (Spain))

  • Martínez-Budría, Eduardo

    (Instituto Universitario de Desarrollo Regional. University of La Laguna (Spain))

  • González, Rosa Marina

    (Department of Economics, Accounting and Finance and Instituto Universitario de Desarrollo Regional. University of La Laguna (Spain))

Abstract

In this paper, a theoretical relationship is obtained to measure the effect that inefficiency has on marginal costs, degree of economies of scale and technical change. It is shown that when the relationship between inefficiency and output level is ignored, the estimation of marginal costs and the degree of economies of scale are incorrect. The measurement of technical change is also wrongly calculated if one does not consider the variation of inefficiency over time. This could lead to incorrect pricing decisions that would transfer inefficiency to the consumer via prices and non-optimal investments in productive capacity. In addition, the effect of technical change on costs could be erroneously estimated. The empirical application of this theoretical model to Spanish port authorities during the period 2008-2016 shows that marginal costs of port services were overestimated, the degree of economies of scale was underestimated and the time variations of the inefficiency were interpreted erroneously as technical change when the relationship between inefficiency and output and time is not considered. || En este trabajo se obtiene una relación teórica para medir el efecto que la ineficiencia tiene sobre los costes marginales, el grado de economías de escala y el cambio técnico. Se muestra que cuando se ignora la relación entre la ineficiencia y el nivel de producción, las estimaciones de los costes marginales y del grado de economías de escala son incorrectas. La medición del cambio técnico también es errónea si no se considera la variación temporal de la ineficiencia. Esto podría llevar a que se tomen decisiones de fijación de los precios que transferirían la ineficiencia al consumidor vía precios y a que las decisiones de inversión en capacidad productiva no fuesen óptimas. Además, el efecto del cambio técnico sobre los costes se podría valorar erróneamente. La aplicación empírica de este modelo teórico a las autoridades portuarias españolas durante el periodo 2008-2016 muestra que los costes marginales de los servicios portuarios se sobreestimaron, el grado de economías de escala se infraestimó y las variaciones temporales de la ineficiencia se interpretaron erróneamente como cambio técnico cuando la relación entre la ineficiencia y los outputs y el tiempo no fue considerada.

Suggested Citation

  • Díaz-Hernández, Juan José & Martínez-Budría, Eduardo & González, Rosa Marina, 2020. "Effects of Inefficiency on Marginal Costs, Degree of Economies of Scale and Technical Change: A Theoretical Relationship. The Case of Spanish Port Authorities || Efectos de la ineficiencia sobre los c," Revista de Métodos Cuantitativos para la Economía y la Empresa = Journal of Quantitative Methods for Economics and Business Administration, Universidad Pablo de Olavide, Department of Quantitative Methods for Economics and Business Administration, vol. 29(1), pages 190-207, June.
    • Handle: RePEc:pab:rmcpee:v:29:y:2020:i:1:p:190-207
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    References listed on IDEAS

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    More about this item

    Keywords

    cost efficiency; marginal cost; degree of economies of scale; technical change; ports; eficiencia en costes; coste marginal; grado de economías de escala; cambio técnico; puertos.;
    All these keywords.

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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