A study of relative efficiency between privatised and publicly operated US ports

Abstract

This study identifies and compares the financial performance of privatised ports with non-privatised ports using the stochastic frontier profit function and panel data regression analysis. The goal of privatisation is to improve capital utilisation, sharpen managerial incentives and reduce bureaucratic waste. Given the arguments in favour of private ownership, the question is whether privatised ports satisfy the expectation of higher profitability. US ports are unique compared to foreign counterparts, with organisational forms ranging from purely public to landlord to private. To assess relative efficiency, we obtain data from the Public Ports Finance Survey for the period 1997 to 2006. Our findings support the argument that private sector involvement has a positive impact on port efficiency in terms of its financial performance. When price of output, capital intensity, cost of labour and size are controlled for, we see greater profit margins in landlord ports.