Does cargo specialization improve port technical efficiency? The paradigm of specialized infrastructure

ABSTRACT

This study analyses the effect of cargo specialisation on Spanish Port Authorities’ technical efficiency. To the best of our knowledge, this is the first study to contend that the effect of cargo specialisation on port efficiency may vary at different levels of specialisation. Specialisation/diversification strategies are examined under different scenarios. A stochastic input-oriented distance function model that accounts for Port Authorities’ heterogeneity is constructed. The results show that increasing specialisation in general cargo improves technical efficiency; however, specialisation in liquid or solid bulk cargo is not recommended—such cargo should ideally be handled jointly with other types of cargo. Finally, full specialisation is also not recommended in terms of technical efficiency gains.

KEYWORDS:

• Cargo specialisation
• port efficiency
• technical efficiency
• specialised infrastructure
• stochastic frontier analysis

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1. When the majority of a port’s inbound cargoes are shipped short distances and most of its export products come from nearby areas, the port is called a captive cargo (in contrast with a transit port) (American Association of Port Authorities 2019).

2. In the economic literature, the distance function has also been used in the analysis of port efficiency in González and Trujillo (2008), Núñez-Sánchez and Coto-Millán (2012), Chang and Tovar (2014a, 2014b), and Coto-Millán et al. (2016a), among the others.

3. For a comprehensive review of stochastic frontier analysis applied to port efficiency, see Tovar and Wall (2015). Recent developments in the field can be found in Serebrisky et al. (2016), Coto-Millán et al. (2016a), Suárez-Alemán et al. (2016), Barros, Chen, and Wanke (2016), Coto-Millán et al. (2016b), Tovar and Wall (2017b), and Chen, Chou, and Hsieh (2018).

4. 28 PAs form the Spanish port system. However, this analysis includes only 26 PAs: (1) Seville is excluded from the sample because it is a fluvial port; hence, its technological conditions may differ from other PAs. (2) Almería and Motril belonged to the same PA until 2005. Then, they became independent PAs. However, both authorities are considered as a unique PA for the whole period of study to assure homogeneity in the sample.

5. See Appendix.

6. Núñez-Sánchez, Jara-Díaz, and Coto-Millán (2011) find that one passenger corresponds to two tons of solid bulk and about three tons of containerised general cargo in terms of marginal costs.

7. In efficiency analysis, outputs are traditionally measured by the throughput as ‘physical outputs’. However, in recent years, studies such as Suárez-Alemán, Trujillo, and Cullinane (2014) and Talley and Ng (2016) have proposed to use ‘service outputs’ for taking into account the time consumed by the cargo handling operations. Using ‘physical outputs’ allows evaluating whether inputs are used appropriately with respect to outputs. On the contrary, addressing ‘services outputs’ instead of physical ones allows obtaining a measure of efficiency in terms of the time that a cargo is in port.

Additional information

Funding

This work was supported by the Programa de Personal Investigador en formación predoctoral de la Universidad de Cantabria, co-funded by the Government of Cantabria [grant number PRE04-2016].