Abstract
This paper aims to estimate the level of technical inefficiency in the hotel sector of a major tourist destination of Europe, the Canary Islands, exploring the relevance of agglomeration processes in efficiency levels. To do this, a complete dataset of the hotel supply for the period 2010–2016 is used. A translog production frontier and an inefficiency function are estimated in a single-stage sampling procedure. Results suggest an aggregate technical inefficiency of approximately 32%. Furthermore, technical efficiency seems to be decreasing with market concentration and congestion, and increasing in agglomeration economies.
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