Economies of scale, elasticities and productive efficiency to the Spanish Airports Network

Abstract

This paper attempts to analyse the productive structure in the airport industry. The analysis was made using the neoclassical approach of dual cost function. A translog joint cost function was used, as its flexibility gave us the possibility of directly modelling the cost structure without imposing arbitrary a priori restrictions on the structure of production. In order to test several hypotheses on the joint cost function we derived parameters such as cost elasticities, economies of scale and elasticities of substitution between inputs. The main conclusions of this work are: 1) The translog form, linear homogeneous in input prices, was statistically significant generalization of the rest of restricted functional forms to represent the productive structure of the Spanish airport industry, 2) The existence of economies of scale in airport operations. Having this an important repercussions in investment programme (airport planning) and cost structure.