Incentive Regulation and Efficiency of Portuguese Port Authorities

Abstract

In all European seaports, organisational efficiency forms a vital component of the activities to improve competitiveness in the market. As public enterprise entities, Portuguese seaports rely on government subsidies to meet their deficits. The policy of subsidisation is part of the regulatory procedures that are intended to provide incentives for increasing productive efficiency, thereby allowing seaports to share in the social gains from efficiency in the form of greater, or at least stable, employment and local development. In addition, the drive for greater efficiency is meant to assist the ports' preparation for some kind of privatisation. In this paper, we analyse the technical and allocative efficiencies of Portuguese seaport authorities in order to investigate if the state's policy is achieving its aims. We find that the results are, at best, mixed, leading us to conclude that the incentive regulation carried out by the government's regulatory body, the Maritime Port Agency, is not achieving its aims. Therefore, we propose a policy revision to enforce efficiency, based on a governance environment framework.