Including the Local Air Pollution in the Airport Efficiency Assessment: a Hyperbolic Stochastic Approach

We estimate a multi-output production stochastic distance functions using a data set composed by 33 Italian airports for the period 2005–2008. We consider both desirable outputs (aircraft movements, passengers and freights) and an undesirable output of airport operations, i.e., the local air pollution. We estimate both a classical distance function (with no undesirable output) and a hyperbolic distance function (including it). By comparing the estimated efficiency scores with these two frontiers we show that airports efficiency increases when local air pollution is included in the analysis. Moreover, we show that there is a fleet mix effect, since airports with similar aircrafts movements exhibit large variations in the amount of pollution per flight. Last, we find that there is complementarity between desirable and undesirable output: a -1% decrease in pollution has an opportunity cost of a -0.67% reduction in passengers and freights.