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Efficiency and Growth of Ethiopian Air Transport IndustryAn Analysis of the Production Efficiency of Ethiopian Airports

Efficiency and Growth of Ethiopian Air Transport Industry: An Analysis of the Production... [This study analyses  efficiency of 13 domestic and international Ethiopian airports. It estimates the Cobb–Douglas production function using the panel data approach covering the period 2002–17. When estimating the production efficiency of these airports, its focus  was on the maximum attainable output of services that can be provided with the available inputs and technology. The efficiency levels can be measured using the ratio of actual output to maximum attainable potential output. Annual weighted average passengers served and freight cargo transported by each airport is treated as the dependent variable while labor, maintenance, repairing and operating expenses, and real capital investments are treated as the explanatory variables. It estimates both time-invariant and time-variant panel data stochastic production frontiers. The production model is estimated using several stochastic frontier approaches including the efficiency effects distance approach of (Battese and Coelli, Empirical Economics 20:325–332, 1995) model, fixed effect, separation of persistent and transitory efficiency of KLH-2014 (Kumbhakar et al., J Prod Anal 41:321–337, 2014), and MLE models. The models underlying different distributional assumptions are  estimated using the maximum likelihood method. In all five models, the time invariant efficiency level has slight difference that may depend on their model assumption and estimation techniques. What is surprising about the findings is that many airports had very low levels of efficiency implying underutilization of the invested capital infrastructures. Besides, the persistent or long-run efficiency is very low, hence, the problem of inefficiency will stay for a long period unless urgent measures are taken and implemented by the government for bringing about necessary structural changes. The negative and highly significant sign of the inefficiency of airport categories shows that an increase in airport production capacity will reduce their technical inefficiencies. This requires the airports’ administration to focus on providing basic airport facilities in parallel with air traffic passenger growth including an airport master plan and developing a design for avoiding the underutilization of the facilities at the airports.] http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png

Efficiency and Growth of Ethiopian Air Transport IndustryAn Analysis of the Production Efficiency of Ethiopian Airports

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Publisher
Springer Nature Singapore
Copyright
© The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2022
ISBN
978-981-19-3431-5
Pages
75 –124
DOI
10.1007/978-981-19-3432-2_3
Publisher site
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Abstract

[This study analyses  efficiency of 13 domestic and international Ethiopian airports. It estimates the Cobb–Douglas production function using the panel data approach covering the period 2002–17. When estimating the production efficiency of these airports, its focus  was on the maximum attainable output of services that can be provided with the available inputs and technology. The efficiency levels can be measured using the ratio of actual output to maximum attainable potential output. Annual weighted average passengers served and freight cargo transported by each airport is treated as the dependent variable while labor, maintenance, repairing and operating expenses, and real capital investments are treated as the explanatory variables. It estimates both time-invariant and time-variant panel data stochastic production frontiers. The production model is estimated using several stochastic frontier approaches including the efficiency effects distance approach of (Battese and Coelli, Empirical Economics 20:325–332, 1995) model, fixed effect, separation of persistent and transitory efficiency of KLH-2014 (Kumbhakar et al., J Prod Anal 41:321–337, 2014), and MLE models. The models underlying different distributional assumptions are  estimated using the maximum likelihood method. In all five models, the time invariant efficiency level has slight difference that may depend on their model assumption and estimation techniques. What is surprising about the findings is that many airports had very low levels of efficiency implying underutilization of the invested capital infrastructures. Besides, the persistent or long-run efficiency is very low, hence, the problem of inefficiency will stay for a long period unless urgent measures are taken and implemented by the government for bringing about necessary structural changes. The negative and highly significant sign of the inefficiency of airport categories shows that an increase in airport production capacity will reduce their technical inefficiencies. This requires the airports’ administration to focus on providing basic airport facilities in parallel with air traffic passenger growth including an airport master plan and developing a design for avoiding the underutilization of the facilities at the airports.]

Published: Sep 20, 2022

Keywords: Production efficiency; Persistent and transient efficiency; Time-varying efficiency; Time-invariant efficiency; Airports; Ethiopia; C13; C14; C33; C51; D24

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