Measuring Cost Efficiency in the Presence of Quasi-fixed Inputs using Dynamic Data Envelopment Analysis: The Case of Port Infrastructure

Long construction periods and long service life of port facilities require the use of infrastructure as a quasi-fixed input. This means that the infrastructure cannot be immediately adjusted to current production and that it contributes to the production of services over several consecutive periods. This article will discuss how an important characteristic of port infrastructure is that its current technology is a consequence of investment decisions that were made in past decades. A dynamic approach that acknowledges the inter-temporal relationship between the inputs used and the resulting outputs is more adequate to handle these types of inputs. The efficiency achieved for Spanish Port Authorities for the years 2000 to 2007 has been obtained using a dynamic inter-temporal Data Envelopment Analysis (DEA) cost model. This model shows many dynamic and static components of inefficiency. The result has been compared with that obtained from a static approach that shows the static model overstates all components of cost inefficiency. If the specific characteristics of port infrastructure are not considered, the consequences could lead to investment decisions being made that seek to expand the productive capacity of the port when such an expansion is not needed. The static model is unable to yield the dynamic inefficiency because it has a tendency to transform efficiency into technical and allocative ones, that tend to lead towards faulty investment decisions.

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  • English

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  • Accession Number: 01529568
  • Record Type: Publication
  • Files: TRIS
  • Created Date: May 23 2014 4:54PM