Infrastructure Compensation Funds and Port Efficiency: Evidence from Spain

Abstract

[Abstract]: This paper examines the economic dilemma that arises when infrastructure compensation funds become barriers to efficiency. While such mechanisms are designed to offset structural disadvantages and enhance financial selfsufficiency, they may generate adverse incentives by allowing managers to sustain inefficient operations. Using stochastic frontier analysis, this study analyses the impact of the Interport Compensation Fund (ICF) on the technical efficiency of the 28 Spanish Port Authorities over the period 2018–2021. The results indicate that higher ICF transfers are associated with lower efficiency levels across the port system. However, these findings should be interpreted in light of the structural asymmetries affecting geographically disadvantaged ports, particularly insular and peripheral regions, where traffic limitations and reduced economies of scale may constrain operational performance. These findings provide empirical evidence on the potential efficiency tradeoffs associated with redistributive mechanisms within competitive infrastructure systems and offer relevant insights for port governance design.