Costs and efficiency of highway concessionaires: a survey of Italian operators

Massiani, Jerome and Ragazzi, Giorgio (2008): Costs and efficiency of highway concessionaires: a survey of Italian operators. Published in: European Transport No. 38 (2008): pp. 85-106.

Abstract

Measuring the productivity of highway concessionaires is very relevant, especially when a price cap regulation is applied where tariff increases are based on expected improvements of productivity. Output may be measured in terms of traffic or network length, or a combination of both, while quality of service should ideally be accounted for. To measure productivity we consider only operating costs, as amortization and financial costs depend upon the original highway design and historical costs. A cross section analysis of the Italian concessionaires shows that: 1) operating costs depend on both traffic and capacity; 2) economies of scale are relevant but their estimate is very sensitive to the model specification; 3) there are large differences in efficiency among operators, indicating that there could be significant room for yardstick competition. We subsequently consider the main economic data regarding the major Italian concessionaire (Autostrade spa) over two decades. Revenues increased greatly, even more than traffic, while operating costs remained substantially stable in real terms, as the automation of toll collection allowed the company to reduce the number of collectors by almost half. Finally, a comparison between Italian and French concessionaires shows that the latter have much lower operating costs, which cannot be entirely explained by economies of scale or lower personnel costs.

• Item Type: MPRA Paper
• Language: English
• Keywords: Highway; Regulation; Productivity; Price-cap
• Subjects: R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R4 - Transportation Economics > R42 - Government and Private Investment Analysis ; Road Maintenance ; Transportation Planning; L - Industrial Organization > L9 - Industry Studies: Transportation and Utilities > L91 - Transportation: General; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R4 - Transportation Economics > R48 - Government Pricing and Policy

References

Benfratello, L., Iozzi, A. and Valbonesi, P. (2005), Privatisation, regulation and productivity in the Italian motorway industry”, Marco Fanno Working Paper n 2. Università di Padova.

Benfratello, L., Iozzi, A. and Valbonesi, P. (2006), "Autostrade", Rivista di Politica Economica, March- April 2006, pp. 329-364.

Bruzelius, N. (2004), “Measuring the marginal cost of road use. An international survey”, Swedish National Road and Transport Research Institute, VTI medelande 963A, 54 p.

Deller, S.C. and Nelson C.H. (1991) "Measuring the economic efficiency of producing rural road services", American Journal of Agricultural Economics, Vol. 73, 1, pp. 194–201. Federal Highway Administration (FHWA) (1982) "Final report on the federal highway cost allocation study: report of the secretary of transportation to the United States congress", Washington DC.

Greco, A. and Ragazzi, G. (2005) “History and Regulation of Italian Highway Concessionaires”, in Ragazzi, G. and Rothengatter, W. (editors) “Procurement and Financing of Motorways un Europe”, Elsevier, Amsterdam, pp. 121-133.

Jondrow, J., Lovell, C. A. K., Materov I. S. and Schmidt P. (1982), "On the estimation of technical inefficiency in the stochastic frontier production function model", Journal of Econometrics, Vol. 19, pp. 233-218.

Levinson, D. M. and Gillen D. (1998) "The full cost of intercity highway transportation", Transportation Research D , Vol. 3, 4: pp. 207-223.

Link, H. (2003) "Estimates of marginal infrastructure costs for different modes of transport" 43rd Congress of the European Regional Science Association: 22 p.

Massiani, J., Ragazzi, G. (2006), "Production and productivity of Italian highway concessions” Scientific meeting of the Società Italiana d'Economia dei Trasporti (Italian society of Transport Economics). Trieste, June 2006. Published in: I trasporti ed il mercato globale, Edited by Polidori G., Borruso G., Danielis R., Franco Angeli editor, Milano, pp. 277-285.

Mediobanca, Annuario R&S (Ricerche e Studi), yearly edition from 1985 to 2005, Milano.

Ozbay, K., Bartin, B and Berechman J. (2001), "Estimation and evaluation of full marginal costs of highway economics in New Jersey", Journal of Transportation Statistics, Vol. 4, 1, pp. 81-103.

Ragazzi, G., (2004), Politiche per la regolamentazione del settore autostradale e il finanziamento delle infrastrutture, Economia Pubblica, 34(4), pp. 5-33.

Rosko, M. D., and Mutter, R. L. (2007), Stochastic Frontier Analysis of Hospital Inefficiency: A Review of Empirical Issues and an assessment of robustness, Medical Care Research and Review.