Assessing container operator efficiency with heterogeneous and time-varying production frontiers

We build an empirical model under the stochastic frontier framework to assess production efficiencies of container operators from the world’s major container ports in the years between 1997 and 2004. The empirical model measures efficiencies, efficiency changes, and time-persistence of efficiencies after controlling for the individual heterogeneity in technology and technical change. The model is estimated using a Bayesian approach via the Markov Chain Monte-Carlo simulation. We find that the mean efficiency level of the container operators is in the range of 70–90% of their full efficiencies, and the mean efficiency changed with time slightly. However, the percentage of highly efficient operators has increased since 1997. Common model misspecifications without controlling for the individual heterogeneity and technical change can alter the results dramatically.