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The impact of airport competition on technical efficiency: A Stochastic Frontier Analysis applied to Italian airports

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Author Info

  • Davide Scotti

    ()

  • Paolo Malighetti
  • Gianmaria Martini
  • Nicola Volta

Abstract

We investigate how the intensity of competition among airports affects their technical efficiency by computing airports’ markets on the basis of a potential demand approach. We find that the intensity of competition has a negative impact on airports’ efficiency in Italy during the 2005–2008 period. This implies that airports belonging to a local air transportation system where competition is strong exploit their inputs less intensively than do airports with local monopoly power. Furthermore, we find that public airports are more efficient than private and mixed ones. Since public airports take into account the positive externalities created by air transportation in the local economy, they are more willing to subsidize airlines in developing the airports’ connections. Hence, policy makers should provide incentives to implement airports’ specialization in local systems where competition is strong. Moreover, when regulating airport charges, they should take into account the impact of the above externalities.

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Bibliographic Info

Paper provided by Department of Economics and Technology Management, University of Bergamo in its series Working Papers with number 1004.

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Date of creation: 2010
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Handle: RePEc:brh:wpaper:1004

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Keywords: Airport efficiency; stochastic distance function; airport competition;

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References

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  1. Pels, Eric & Nijkamp, Peter & Rietveld, Piet, 2001. "Relative efficiency of European airports," Transport Policy, Elsevier, vol. 8(3), pages 183-192, July.
  2. Oum, Tae H. & Yan, Jia & Yu, Chunyan, 2008. "Ownership forms matter for airport efficiency: A stochastic frontier investigation of worldwide airports," Journal of Urban Economics, Elsevier, vol. 64(2), pages 422-435, September.
  3. Paolo Malighetti & Gianmaria Martini & Stefano Paleari & Renato Redondi, 2007. "An Empirical Investigation on the Efficiency, Capacity Ownership of Italian Airports," Rivista di Politica Economica, SIPI Spa, vol. 97(1), pages 157-188, January-F.
  4. Wing Chow, Clement Kong & Fung, Michael Ka Yiu, 2009. "Efficiencies and scope economies of Chinese airports in moving passengers and cargo," Journal of Air Transport Management, Elsevier, vol. 15(6), pages 324-329.
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  7. Reifschneider, David & Stevenson, Rodney, 1991. "Systematic Departures from the Frontier: A Framework for the Analysis of Firm Inefficiency," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 32(3), pages 715-23, August.
  8. Carlos Pestana Barros, 2008. "The Technical Efficiency of UK Airports," Working Papers Department of Economics 2008/10, ISEG - School of Economics and Management, Department of Economics, University of Lisbon.
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  13. Curi, Claudia & Gitto, Simone & Mancuso, Paolo, 2010. "The Italian airport industry in transition: a performance analysis," Journal of Air Transport Management, Elsevier, vol. 16(4), pages 218-221.
  14. Simar, Leopold & Wilson, Paul W., 2007. "Estimation and inference in two-stage, semi-parametric models of production processes," Journal of Econometrics, Elsevier, vol. 136(1), pages 31-64, January.
  15. Charnes, A. & Cooper, W. W. & Golany, B. & Seiford, L. & Stutz, J., 1985. "Foundations of data envelopment analysis for Pareto-Koopmans efficient empirical production functions," Journal of Econometrics, Elsevier, vol. 30(1-2), pages 91-107.
  16. Daniel P. Kessler & Mark B. McClellan, 2000. "Is Hospital Competition Socially Wasteful?," The Quarterly Journal of Economics, MIT Press, vol. 115(2), pages 577-615, May.
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Cited by:
  1. Tiziana D’Alfonso & Cinzia Daraio & Alberto Nastasi, 2013. "Assesing the Impact of Competition on the Efficiency of Italian Airports," DIAG Technical Reports 2013-01, Department of Computer, Control and Management Engineering, Universita' degli Studi di Roma "La Sapienza".
  2. De Luca, Mario & Dell'Acqua, Gianluca, 2014. "Runway surface friction characteristics assessment for Lamezia Terme airfield pavement management system," Journal of Air Transport Management, Elsevier, vol. 34(C), pages 1-5.
  3. Pavlyuk, Dmitry, 2012. "Airport Benchmarking and Spatial Competition: a Critical Review," MPRA Paper 43391, University Library of Munich, Germany.

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