Specialisation, diversification, size and technical efficiency in ports: an empirical analysis using frontier techniques

 

Beatriz Tovar* and Alan Wall**

*Infrastructure and Transport Research Group (EIT), Department of Applied Economics, University of Las Palmas de Gran Canaria, Campus Universitario de Tafira, Modulo D, Las Palmas de Gran Canaria, 35017 Spain.
T: +34928451794
E: beatriz.tovar@ulpgc.es

**Oviedo Efficiency Group, Department of Economics, University of Oviedo, Avenida del Cristo s/n, 33071 Spain.
T: +34985104872
E: awall@uniovi.es

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Abstract

This paper explores the relationship between output specialisation, diversification, size and technical efficiency in ports. Using a sample of Spanish port authorities observed over the period 1993-2012, we calculate a normalised Herfindahl-Hirschman index of overall specialisation and indices of relative specialisation in the individual cargoes. An output distance frontier is estimated using non-parametric Data Envelopment Analysis techniques to calculate technical efficiency. These efficiency scores are then used to test that relationship with a bootstrapped truncated regression. We find that both overall and relative output specialisation have a positive influence on technical efficiency. Moreover, the positive effects of specialisation on technical efficiency is reinforced for larger ports, which are in a better position to take advantage of economies of scale and which can also attract different types of cargo (enjoying also economies of scope) and therefore protect themselves from adverse demand conditions. Our results underline the trade-off for smaller port authorities between efficiency gains from specialisation and their vulnerability to market conditions for their main output.

Keywords: : data envelopment analysis, economies of scale and scope, output distance frontier, output specialisation, ports, technical efficiency, truncated regression.