Scale economies and marginal costs in Spanish airports

Abstract

In this paper, we estimate alternative specifications of the Spanish airports’ cost function with the objective to provide a comparative analysis on several technological features such as output-specific marginal costs, economies of scale, and the Allen elasticities of substitution. We found evidence of significant and unexhausted scale economies as well as technological development in the Spanish airport industry. The results suggest that traffic consolidation in multi-airport areas such as the Basque Country or Catalonia will result in lower costs for the public operator.