Sources of efficiency gains in port reform: a DEA decomposition of a Malmquist TFP index for Mexico

Abstract

Mexico's port system was centrally managed by public firms until 1993 reforms liberalized and decentralized it to regional port authorities to improve its efficiency. This paper measures the changes in, and sources of, efficiency since the reforms. We rely on a Malmquist index to calculate and decompose changes in productivity, in terms of infrastructure, for Mexico's 11 main ports between 1996 and 1999. The results suggest that total factor productivity in Mexican ports rose by an average of 4.1% a year in 1996-1999. They also suggest the fourth year, because some ports saw their scale efficiency deteriorate as a result of the effects of the East Asia crisis. We finally show that with one exception, all the ports maintained or improved their pure technical efficiency during the sample period. We conclude by arguing that these types of results could be used by any port regulator to improve the effectiveness and fairness of its regulatory decisions.