Lessons from port sector regulatory reforms in Denmark: An analysis of port governance and institutional structure outcomes

Abstract

This paper studies the recent regulatory reform and current institutional structure of the Danish port sector. We document changes with regard to the structure of management, the financial strength and the market power of partially or fully municipally controlled ports in response to the Port Law passed in 1999 and most recently revised in 2012. This law enabled greater degrees of freedom for ports to engage in cargo handling operations while in some cases retaining advantageous public financing. During a period of overall slowdown in goods volumes, we document expansionary development of municipally controlled ports, and we argue that such a phenomenon is attributable to the institutional structure and rules set by the Danish Port Law. For a future legal framework to successfully aid the port sector in realizing its relevant goal of cost-efficiently producing goods handling services, the risk of opportunistic behaviour needs to be explicitly recognized and managed.