Determining the relationship between ownership and technical efficiency by using a dynamic stochastic production frontier approach

Abstract

This study adopts dynamic stochastic production frontier approach. Because of the impact of quasi-fixed inputs, airports cannot immediately adjust their production processes. Based on the heterogeneity of public and private airports' operation models, this study estimates their individual production adjustment speed and their short-run and long-run technical efficiencies to compare transnational airport business performance. The results reveal the differences in the production adjustment of airport groups under different ownerships and performance. Private airports have faster production adjustment, whereas public airports have higher short-run and long-run technical efficiencies. As their primary goal, public airports should strive to increase the elasticity of production adjustment to increase the production adjustment speed, thus improving their long-run technical efficiency. On the other hand, private airports should prioritize eliminating short-run inefficiency to increase their actual output level, thereby improving their long-run technical efficiency.