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A cross sectional analysis of ship maintenance expenses

Listed author(s):
  • Georgios Bitros

    (Athens University of Economics & Business)

  • Manolis Kavussanos

    (Athens University of Economics & Business)

This paper introduces an econometric model to explain the determinants of expenditure in ship maintenance and repair. The data refer to 112 vessels of different types that operated in 1999 and were collected from ten Greek ship owning and management companies. On the meth-odological plain the best functional form is obtained when estimating a semi log- linear model. As expected from theory, the empirical results show that maintenance expenditure is positively related to utilization, age, and size. In addition the effect of age is found to be stronger on vessels younger than 20 years. This may be due to the fact that vessels less than 20 years old can be sold more easily in the second-hand market, whereas older vessels have a shorter lifetime and are also constrained by safety regulations. Therefore, ship owners are more reluctant to spend more once the vessel passes its 4th and especially its 5th special survey. To trace the effect of company poli-cies we included in the model company dummy variables. We found that such effects are present particularly when stores expenses are estimated separately. In turn, this suggested that company policies have still some control on maintenance expenses. Another result is that the elasticities of maintenance expenses with respect to utilization, age, and size at least in 1999 were uniformly less than one, thus revealing the existence of significant economies of scale. And still another result is that the type of ship, the flag, the classification and even the yard where maintenance takes place are significant determinants of the respective outlays.

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Paper provided by EconWPA in its series Macroeconomics with number 0504030.

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Length: 27 pages
Date of creation: 21 Apr 2005
Handle: RePEc:wpa:wuwpma:0504030
Note: Type of Document - pdf; pages: 27
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  1. K. X. Li & J. Wonham, 1999. "Who is safe and who is at risk: a study of 20-year-record on accident total loss in different flags," Maritime Policy & Management, Taylor & Francis Journals, vol. 26(2), pages 137-144, April.
  2. Bitros, George C, 1976. "A Statistical Theory of Expenditures in Capital Maintenance and Repair," Journal of Political Economy, University of Chicago Press, vol. 84(5), pages 917-936, October.
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