A study analyses the efficiency in motorway management

The study was published in <i>Research in Transportation Economics</i>.
The study was published in Research in Transportation Economics.
Research
(19/12/2019)

A recently published study in the journal Research in Transportation Economics analyses the efficiency of toll motorway management in Spain between 1988 and 2015. The study has been conducted by researchers Daniel Albalate and Jordi Rosell, members of the Observatory of Analysis and Evaluation of Public Policies of the University of Barcelona.

The study was published in <i>Research in Transportation Economics</i>.
The study was published in Research in Transportation Economics.
Research
19/12/2019

A recently published study in the journal Research in Transportation Economics analyses the efficiency of toll motorway management in Spain between 1988 and 2015. The study has been conducted by researchers Daniel Albalate and Jordi Rosell, members of the Observatory of Analysis and Evaluation of Public Policies of the University of Barcelona.

One of the most outstanding results is that there is no sign of any benefit from an improvement of the efficiency in costs from a private manager for motorway compared to its public counterpart. This is analysed in two ways: comparing public and private highway concessionaires and analysing the following years to privatization processes. In the former, there is no difference regarding a better management between public and private companies over the analysed period of time. However, the study shows how during the following years to its privatization, there is no improvement in the efficiency of motorways. “Regarding the current situation of the end of concessions and rescue of private highways, we do not find any evidence in favour of public nor private management”, says Jordi Rosell, one of the authors of the study. What they did find is that concessionaries that failed show clearly low levels of structural efficiency. “This shows it is not public or private management of highways that improves efficiency, but selecting and building highways with proper levels of demand”, notes Jordi Rosell.

Another result states that those motorways promoted by autonomic and local governments are more efficient than those promoted by the central Government. Highways that are promoted by regional and local governments show between 2 and 4 more points of efficiency, which translates into tens of thousands of euros per year. “This occurs due the fact that regional governments are more capable to select viable projects and avoid the white elephant, that is, those projects with a low social value”, notes Daniel Albalate, lecturer of Economics at the University of Barcelona and also author of the study. For instance, in those motorways that are promoted by autonomic and local governments, the building phase is more expensive -mainly because these projects have to face geographical difficulties- but in spite of that, future deposits per kilometer double here compared to the motorways that are promoted by the State. According to Albalate, “we have to pay more attention to the economic and financial evaluation of highway construction projects instead of the following decision on public and private management”, concludes.

Other obtained data are decreases of levels of the cost around 0.4% per year, which shows that, despite the introduction of technological innovation such as automatic payment machines, this sector shows low productivity profits. Another conclusion states that density economies are more important than scale economies: increasing traffic is more relevant than expanding the highway network. The study includes all highway agents in Spain between 1988 (the year when all the information for every highway agent is provided) and 2015. There are only some agents excluded in the Basque Country due a lack of information. At the beginning, between eight and ten agents are considered, while at the end of the period the amount of highway agents increases up to thirty-one. The study considers annual variable for each agent such as total costs, maintenance costs and capital cost, as well as traffic, network length and amount of accidents, among others.

The study uses stochastic frontier analysis to estimate the efficiency of costs, and differences between two types of efficiency: persistent efficiency, related to the construction of projects and sunk costs, and transient efficiency, more related to the efficiency of management.

 

Article reference:

Daniel Albalate, Jordi Rosell. "On the efficiency of toll motorway companies in Spain", Research in Transportation Economics, setembre del 2019. Doi: https://doi.org/10.1016/j.retrec.2019.100747