Effects of Corruption on Efficiency of the European Airports
CREATE working paper serie 2015-1
31 Pages Posted: 1 Dec 2018
Date Written: February 1, 2015
The effect of corruption on airport productive efficiency is analyzed using an unbalanced panel data of major European airports from 2003 to 2009. We first compute the residual (or net) variable factor productivity using the multilateral index number method and then apply robust cluster random effects model in order to evaluate the importance of corruption. We find strong evidence that corruption has negative impacts on airport operating efficiency; and the effects depend on the ownership form of the airport. The results suggest that airports under mixed public-private ownership with private majority achieve lower levels of efficiency when located in more corrupt countries. They even operate less efficiently than fully and/or majority government owned airports in high corruption environment. We control for economic regulation, competition level and other airportsí characteristics. Our empirical results survive several robustness checks including different control variables, three alternative corruption measures: International Country Risk Guide (ICRG) corruption index, Corruption Perception Index (CPI) and Control of Corruption Index (CCI). The empirical findings have important policy implications for management and ownership structuring of airports operating in countries that suffer from higher levels of corruption.
Keywords: Corruption Effect, European Airport Operating Efficiency, Residual (or Net) Variable Factor Productivity, Ownership Form, Random Effects Model
JEL Classification: L93, R40, H00
Suggested Citation: Suggested Citation