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An Assessment on the Cost Structure of the UK Airport Industry: Ownership Outcomes and Long Run Cost Economies

Author

Listed:
  • Anna Bottasso

    () (Department of Economics, University of Genova)

  • Maurizio Conti

    () (Department of Economics, University of Genova)

Abstract

In 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.

Suggested Citation

  • Anna Bottasso & Maurizio Conti, 2010. "An Assessment on the Cost Structure of the UK Airport Industry: Ownership Outcomes and Long Run Cost Economies," Working papers 13, Former Department of Economics and Public Finance "G. Prato", University of Torino.
    • Handle: RePEc:tur:wpaper:13
    as

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    File URL: http://www.biblioecon.unito.it/biblioservizi/RePEc/tur/wpaper/n13.pdf
    File Function: First version, 2010
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    References listed on IDEAS

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    Cited by:

    1. Fabrizio Erbetta & Carmelo Petraglia, 2011. "Drivers of Regional Efficiency Differentials in Italy: Technical Inefficiency or Allocative Distortions?," Growth and Change, Wiley Blackwell, vol. 42(3), pages 351-375, September.

    More about this item

    Keywords

    scale economies; public ownership; airports;

    JEL classification:

    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • L91 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Transportation: General

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