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Public Enterprise Efficiency: The Case of the New York Canals

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  • Donald Vitaliano

Abstract

A random effects stochastic frontier variable cost function is estimated for the Erie Canal and nine interconnected lateral canals in New York, covering the period 1837–1881. Variable costs are 50 % above least cost for the Erie and 42 % above across all the 10 canals. Inefficiency does not vary over time in response to numerous changes in canal administrative structures and personnel or the advent of railroads. The canal system was plagued by documented waste, fraud and mismanagement throughout its history. A privatized, price capped Erie Canal was proposed in 1817, but rejected on political grounds. Copyright Springer Science+Business Media New York 2015

Suggested Citation

  • Donald Vitaliano, 2015. "Public Enterprise Efficiency: The Case of the New York Canals," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 46(2), pages 169-182, March.
    • Handle: RePEc:kap:revind:v:46:y:2015:i:2:p:169-182
    DOI: 10.1007/s11151-014-9448-6
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    References listed on IDEAS

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    1. Stanley Engerman & Kenneth L. Sokoloff, 2004. "Digging the Dirt at Public Expense: Governance in the Building of the Erie Canal and Other Public Works," NBER Working Papers 10965, National Bureau of Economic Research, Inc.
    2. Vitaliano, Donald F., 2005. "Estimation of the Return on Capital in Municipal Water Systems," National Tax Journal, National Tax Association;National Tax Journal, vol. 58(4), pages 685-696, December.
    3. Braeutigam, Ronald R. & Daughety, Andrew F., 1983. "On the estimation of returns to scale using variable cost functions," Economics Letters, Elsevier, vol. 11(1-2), pages 25-31.
    4. Vining, Aidan R & Boardman, Anthony E, 1992. "Ownership versus Competition: Efficiency in Public Enterprise," Public Choice, Springer, vol. 73(2), pages 205-239, March.
    5. Smith, Walter B., 1963. "Wage Rates on the Erie Canal, 1828–1881," The Journal of Economic History, Cambridge University Press, vol. 23(3), pages 298-311, September.
    6. Greene, William, 2005. "Reconsidering heterogeneity in panel data estimators of the stochastic frontier model," Journal of Econometrics, Elsevier, vol. 126(2), pages 269-303, June.
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    More about this item

    Keywords

    Cost efficiency; Erie canal; Public enterprise; R5; D24; N7; C1; H110; H4;
    All these keywords.

    JEL classification:

    • R5 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • N7 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services
    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • H4 - Public Economics - - Publicly Provided Goods

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