The Estimation of Minimum Efficient Scale of the Port Industry

Young-Joon Seo, Jin Suk Park

Research output: Chapter in Book/Report/Conference proceedingConference proceeding


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 vital, because they sometimes determine the way in which existing assets should be subdivided for port concession. In addition, they may utilise this information regarding the MES when planning to develop new ports based on the port capacity or the existing size of the terminal. Central or regional governments or port authorities have strived for the optimal port capacity, because it is directly connected to both national and regional economics as an economic springboard. Notwithstanding the importance of knowing the exact MES, extant literature has not managed to estimate MES in the port industry. The main purpose of this study is 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. By doing so, this study can provide port planners and 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 excessive port competition. The finding demonstrates that undercapacity may be a strong issue in Korean container ports, whilst CTOs in Busan port are in an overcapacity area with collective handling capacity per year approximately 11 times larger than the estimated MES. In addition, not many CTOs are within the range of optimal capacity around the MES.
Original languageEnglish
Title of host publicationInternational Association of Maritime Economists
Publication statusPublished - 2015
EventLRN Annual Conference and PhD Workshop - University of Derby, Derby, United Kingdom
Duration: 9 Sep 201511 Sep 2015


ConferenceLRN Annual Conference and PhD Workshop
CountryUnited Kingdom

Bibliographical note

The full text is currently unavailable on the repository.


  • MES
  • port
  • port competition
  • container terminal
  • port capacity


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