Examining the relationship between relative size and technical efficiency in peripheral port markets: Evidence from Irish and North Atlantic Spanish ports

Abstract

In peripheral port markets, a limited volume of traffic creates challenges in sustaining multiple competing Port Authorities (PAs). With a limited size, smaller ports have difficulty in attracting the necessary traffic flows to leverage capital for development. In many European jurisdictions, recent policy reform has sought to concentrate resources in dominant ports or amalgamate smaller PAs to increase competitiveness and rationalize investments. This paper formally examines the link between port size and achievable efficiencies through an efficiency analysis of Irish and Atlantic Spanish ports. To achieve this, the paper applies a two-step double bootstrap Data Envelopment Analysis (DEA) approach to examine the effect of relative size on technical efficiency across the two port systems in the period 2000-2015. The results indicate a positive relationship between size and technical efficiency amongst ports in peripheral regions. As the time-period covers the financial crisis, it is possible to further explore the effect of the recession and subsequent contraction in the market for port services on the relationship between size and technical efficiency. The findings indicate that the effect of size on technical efficiency becomes even stronger when market contraction is controlled for. Results also show that the efficiency gap between the larger and smaller ports increased considerably after the recession.