The efficiency of postal services in the age of market liberalization and the internet: Evidence from Central and Eastern Europe

• We examine the productive efficiency of postal operators in East Europe.
• We use nonparametric models with quantitative and qualitative outputs.
• Inefficiency of postal services is between 20 and 30%.
• Increased competition and institutional reforms result in efficiency gains.
• Growing number of internet users has a negative effect on postal efficiency.

The rise in electronic communications and the recent liberalization of the postal market in the European Union have put national postal-service providers in Central and Eastern Europe (CEE) under pressure to restructure and optimize their operations. The paper employs non-parametric methods to measure the relative technical and cost efficiency of CEE postal operators in terms of quantity-based and quality-based output indicators. The results indicate that inefficiency varies between 20% and 30%. Regression analysis attributes efficiency gains to increased competition, institutional reforms, less burdensome customs procedures, and population density, while use of electronic mail was negatively related to postal-service efficiency.