A Multi-step Approach to Model the Relative Efficiency of European Ports: The Role of Regulation and Other Non-discretionary Factors

Abstract

In this paper the authors seek to provide an estimation of the impact of exogenous factors on the efficiency of ports, cleared of statistical noise. These factors include governance regime and local socio-economic conditions. Included in the analysis is the application of a three-stage data envelope analysis (DEA) procedure to a panel of European ports, observed over a ten-year period. This allows the decomposition of DEA efficiency measures into three components: exogenous effects, managerial inefficiency and stochastic events. The second stage of the analysis applies a stochastic framework model in order to identify the determinants of input-specific efficiency differentials across ports. Governance-related factors are shown to predominate over managerial skills in determining efficiency scores cleared of exogenous influences. It is asserted that this procedure allows further insights into the evolution of the port industry in the European Union which can lead to improved operational port performance. The conclusions show that by controlling for factors considered outside the direct control of port managers, port efficiency performance can change significantly.