US airport ownership, efficiency, and heterogeneity

• Stochastic frontier analysis on a panel of 50 US large and medium hub airports.
• Airport ownership – city, county, state, authority – has little effect on cost efficiency.
• Scale economies primarily explain cost differences by ownership type.
• Not controlling for airport heterogeneity affects cost efficiency estimates.

All US commercial airports are in the public sector yet not all have the same ownership type. For medium and large hub US airports we use stochastic frontier analysis to analyze the efficiency differences for alternative airport ownership types. We find that while form of ownership may matter for cost efficiency, in general its effect is relatively small. Yet type of public sector ownership does have cost efficiency implications in certain environments. Further, when heterogeneity is not controlled, the results change substantially so that type of ownership matters much more which demonstrates the importance of controlling for cross section heterogeneity.

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