An Assessment on the Cost Structure of the UK Airport Industry: Ownership Outcomes and Long Run Cost Economies
AbstractIn this paper we analyze the cost structure of the UK airport industry by estimating a variable cost function for the period 1994-2005. Overall results suggest that the long run average costs curve is U-shaped: it decreases until passenger traffic reaches approximately five millions, it remains flat over the range between five and fourteen million passengers and afterwards it starts to increase. Moreover, our findings provide evidence consistent with the existence of some degree of overcapitalization for the largest regulated airports. Finally, we analyze whether different forms of ownership entail cost differentials across airports and we find that privately owned airports are characterized by lower costs with respect to public and mixed ones, although cost differentials shrank over time as public and mixed airports improved their rate of cost reduction. Main results are robust to unobserved heterogeneity at the airport or market level and to possible endogeneity biases. Possible regulatory and policy implications of these results are also discussed.
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Bibliographic InfoPaper provided by Former Department of Economics and Public Finance "G. Prato", University of Torino in its series Working papers with number 13.
Length: 26 pages
Date of creation: Apr 2010
Date of revision:
scale economies; public ownership; airports;
Find related papers by JEL classification:
- L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
- L91 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Transportation: General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-05-08 (All new papers)
- NEP-EUR-2010-05-08 (Microeconomic European Issues)
- NEP-URE-2010-05-08 (Urban & Real Estate Economics)
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