Abstract
Terminal scale has been the subject of discrete episodes of hotly contested policy debates. From the perspective of port authorities or governments, knowing the Minimum Efficient Scale (MES) is salient, because they sometimes determine the port development or expansion based on the port capacity or the existing size of the terminal. Notwithstanding the importance of knowing the exact MES, extant literature has not managed to estimate MES in the port industry. This study aims to estimate the MES in the port industry in South Korea in order to identify whether Container Terminal Operators (CTOs) are under economies of scale, constant economies of scale or diseconomies of scale; we explore a bottom point of the average cost curve in order to suggest an adequate scale for the port industry in Korea. The finding demonstrates that undercapacity may be a strong issue in Korean container ports. However, CTOs in Busan port are in an overcapacity area given the market demand of container throughput in 2013, which is approximately 25 times larger than the estimated MES; in fact, all CTOs in Busan port operate at more than 20% of MES. This study then can provide port policy makers with a helpful tool to derive ex-ante MES level at the terminal designing stage and to adjust ex-post port investment decisions at the additional port capacity designing stage, which may contribute to avoiding overcapacity.
DOI
10.1016/j.tranpol.2016.04.012
Publication Date
2016-07-01
Publication Title
Transport Policy
Volume
49
Publisher
Elsevier BV
ISSN
0967-070X
Embargo Period
2024-11-19
First Page
168
Last Page
175
Recommended Citation
Seo, Y., & Park, J. (2016) 'The estimation of minimum efficient scale of the port industry', Transport Policy, 49, pp. 168-175. Elsevier BV: Available at: https://doi.org/10.1016/j.tranpol.2016.04.012
Comments
publisher: Elsevier articletitle: The estimation of minimum efficient scale of the port industry journaltitle: Transport Policy articlelink: http://dx.doi.org/10.1016/j.tranpol.2016.04.012 content_type: article copyright: © 2016 Elsevier Ltd. All rights reserved.