Efficiency and productivity analysis of universal service obligation: a case of 29 designated operators in the European countries
Abstract
The main aim of this paper is to perform efficiency and productivity analysis of Universal Service Obligation (USO) based on the Malmquist Productivity Indices (MPI) analysis. The study focuses on 29 Designated Operators (DOs) and two isolated periods, the years 2003 and 2017. There is a clear trend of workforce reduction (12%). Considering the postal services, the data confirm a general trend that the letter-post is in decline (30%) and the parcels are on the rise (52%). Considering the financial results, both costs and revenues are increased; however, there is a higher increase of revenue (33.13%) compared to the cost (32.61%). Further, the results of implemented methodology are twofold. Firstly, a progress is determined at the average level of all observed DOs according to the efficiency and productivity indicators. Among other, the results indicate the increase of productivity for both input MPI (3.5%) and output MPI (8%). However, there are significant variations of efficiency and productivity at the individual level. Secondly, the aim of research was also to examine the sources of productivity changes by considering postal market liberalization, ownership, marketing services and e-commerce. Our findings show that the last three specified variables contribute to the explanation of productivity change.
First published online 28 February 2020
Keyword : efficiency, DEA, Malmquist productivity indices, designated operators, universal postal service obligation
How to Cite
Ralević, P. ., Dobrodolac, M. ., Švadlenka, L. ., Šarac, D. ., & Đurić, D. . (2020). Efficiency and productivity analysis of universal service obligation: a case of 29 designated operators in the European countries. Technological and Economic Development of Economy, 26(4), 785-807. https://doi.org/10.3846/tede.2020.12062
This work is licensed under a Creative Commons Attribution 4.0 International License.
References
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Färe, R., Grosskopf, S., Norris, M., & Zhang, Z. (1994). Productivity growth, technical progress, and efficiency change in industrialized countries. The American Economic Review, 84(1), 66–83. https://www.jstor.org/stable/2117971
Filippini, M., & Zola, M. (2005). Economies of scale and cost efficiency in the postal services: Empirical evidence from Switzerland. Applied Economic Letters, 12(7), 437–441. https://doi.org/10.1080/13504850500109709
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International Post Corporation. (2019). Strategic perspectives on the postal market. http://www.ipc.be/~/media/Documents/PUBLIC/Markets/Strategic%20Perspectives%202012%20FINAL.pdf
International Trade Statistics. (2019). ISO 3166-1 alpha-3 Country Codes. https://unstats.un.org/unsd/tradekb/knowledgebase/country-code
Iturralde, J. M., & Quiros, C. (2008). Analysis of efficiency of the European postal sector. International Journal of Production Economics, 114(1), 84–90. https://doi.org/10.1016/j.ijpe.2008.03.001
Jaag, K. (2014). Postal-sector policy: From monopoly to regulated competition and beyond. Utilities Policy, 31(SI), 266–277. https://doi.org/10.1016/j.jup.2014.03.002
Keh, H. T., & Chu, S. (2003). Retail productivity and scale economies at the firm level: A DEA approach. Omega, 31(2), 75–82. https://doi.org/10.1016/S0305-0483(02)00097-X
Kortelainen, M. (2008). Dynamic environmental performance analysis: A Malmquist index approach. Ecological Economics, 64(4), 701–715. https://doi.org/10.1016/j.ecolecon.2007.08.001
Kujacic, M., Blagojevic, M., Sarac, D., & Vesovic, V. (2015). The modified activity-based costing method in universal postal service area: Case study of the Montenegro post. Inzinerine Ekonomika-Engineering Economics, 26(2), 142–151. https://doi.org/10.5755/j01.ee.26.2.2818
Laspeyres, É. (1871). Die Berechnung einer mittleren Warenpreissteigerung. Jahrbücher für Nationalökonomie und Statistik / Journal of Economics and Statistics, 16, 296–314.
Malmquist, S. (1953). Index numbers and indifference surfaces. Trabajos de Estatistica, 4(2), 209–242. https://doi.org/10.1007/BF03006863
Mizutani, F., & Uranishi, S. (2003). The post office vs. parcel delivery companies: Competition effects on costs and productivity. Journal of Regulatory Economics, 23(3), 299–319. https://doi.org/10.1023/A:1023368327735
Nishimizu, M., & Page, J. M. (1982). Total factor productivity growth, technological progress and technical efficiency change: Dimensions of productivity change in Yugoslavia 1965–78. The Economic Journal, 92(368), 920–936. https://doi.org/10.2307/2232675
Odeck, J. (2006). Identifying traffic safety best practice: an application of DEA and Malmquist indices. Omega, 34(1), 28–40. https://doi.org/10.1016/j.omega.2004.07.017
Paasche, H. (1874). Ueber die Preisentwicklung der letzten Jahre nach den Hamburger Börsennotirungen. Jahrbücher für Nationalökonomie und Statistik / Journal of Economics and Statistics, 23(2–4), 168–178. https://doi.org/10.1515/jbnst-1874-0113
Perelman, S., & Pestieau, P. (1994). A comparative performance study of postal services: A productive efficiency approach. Annales d’Économie et de Statistique, 33, 187–202. https://doi.org/10.2307/20075942
Post & Parcel. (2019). Polish Post seeks central role in e-government services. http://postandparcel.info/54402/news/it/polish-post-seeks-central-role-in-e-government-services/
Quiros, C. (2011). Liberalization and efficiency in the European postal sector. Applied Economics Letters, 18(12), 1155–1158. https://doi.org/10.1080/13504851.2010.528350
Ralević, P. (2014). A model for designated operator resource optimization based on measuring the efficiency of postal services providing (Doctoral dissertation). University of Belgrade, Faculty of Transport and Traffic Engineering, Serbia). http://nardus.mpn.gov.rs/bitstream/handle/123456789/4212/Disertacija119.pdf?sequence=1&isAllowed=y
Ralević, P., Dobrodolac, M., & Marković, D. (2016). Using a nonparametric technique to measure the cost efficiency of postal delivery branches. Central European Journal of Operations Research, 24(3), 637–657. https://doi.org/10.1007/s10100-014-0369-0
Ralević, P., Dobrodolac, M., Marković, D., & Finger, M. (2014). Stability of the classifications of returns to scale in data envelopment analysis: A case study of the set of public postal operators. Acta Polytechnica Hungarica, 11(8), 177–196. https://www.uni-obuda.hu/journal/Ralevic_Dobrodolac_Markovic_Finger_54.pdf
Ralević, P., Dobrodolac, M., Marković, D., & Mladenović, S. (2015). The measurement of public postal operators’ profit efficiency by using data envelopment analysis (DEA): A case study of European Union member states and Serbia. Inzinerine Ekonomika-Engineering Economics, 26(2), 159–168. https://doi.org/10.5755/j01.ee.26.2.3360
Schuster, P. B. (2013). One for all and all for one: Privatization and universal service provision in the postal sector. Applied Economics, 45(26), 3667–3682. https://doi.org/10.1080/00036846.2012.727982
Solow, R. M. (1957). Technical change and the aggregate production function. The Review of Economics and Statistics, 39(3), 312–320. https://doi.org/10.2307/1926047
Tochkov, K. (2015). The efficiency of postal services in the age of market liberalization and the internet: Evidence from Central and Eastern Europe. Utilities Policy, 36, 35–42. https://doi.org/10.1016/j.jup.2015.09.004
Tone, K. (2001). A slacks-based measure of efficiency in data envelopment analysis. European Journal of Operational Research, 130(3), 498–509. https://doi.org/10.1016/S0377-2217(99)00407-5
Tone, K. (2002). A slacks-based measure of super-efficiency in data envelopment analysis. European Journal of Operational Research, 143(1), 32–41. https://doi.org/10.1016/S0377-2217(01)00324-1
Tone, K., & Tsutsui, M. (2009). Network DEA: A slacks-based measure approach. European Journal of Operational Research, 197(1), 243–252. https://doi.org/10.1016/j.ejor.2008.05.027
Törnqvist, L. (1936). The bank of Finland’s consumption price index. Bank of Finland Monthly Bulletin, 16(10), 1–8. https://helda.helsinki.fi/bof/bitstream/handle/123456789/10834/Bofbul_1936-10.pdf?sequence=1
Universal Postal Union. (2019). http://pls.upu.int/pls/ap/ssp_report.main?p_language=AN&p_choice=BROWSE
USPS. (2019). Funding the universal service obligation – RARC Report (Report Number RARCWP-16-005). United States Postal Services, Office of Inspector General. https://www.uspsoig.gov/sites/default/files/document-library-files/2016/RARC-WP-16-005.pdf
WIK. (2012). Summary of postal privatization in Europe & key lessons. http://www.wik.org/uploads/media/PLV_2012_04_06_Rutgers_Washington.pdf
Zhu, J. (1996). Data envelopment analysis with preference structure. Journal of the Operational Research Society, 47(1), 136–150. https://doi.org/10.1057/jors.1996.12
Zhu, J. (2003). Quantitative models for performance evaluation and benchmarking: Data envelopment analysis with spreadsheets and DEA excel solver. Kluwer Academic Publishers. https://doi.org/10.1007/978-1-4757-4246-6
Caves, D. W., Christensen, L. R., & Diewert, W. E. (1982). The economic theory of index numbers and the measurement of input, output, and productivity. Econometrica, 50(6), 1393–1414. https://doi.org/10.2307/1913388
Cazals, C., Dudley, P., Florens, J. P., Patel, S., & Rodriguez, F. (2008). Delivery offices cost frontier: A robust nonparametric approach with exogenous variables. Review of Network Economics, 7(2), 294–308. https://doi.org/10.2202/1446-9022.1150
CERP. (2008). Guidelines for calculating the net cost of the universal service obligations. http://www.cept.org/files/1049/documents/List%20of%20documents%20(history)/Guidelines%20Calculation%20 net%20costs%20USO.pdf
Charnes, A., Cooper, W. W., & Rhodes, E. (1978). Measuring the efficiency of decision making units. European Journal of Operational Research, 2(6), 429–444. https://doi.org/10.1016/0377-2217(78)90138-8
Chen, Y. (2003). Non-radial Malmquist productivity index with an illustrative application to Chinese major industries. International Journal of Production Economics, 83(1), 27–35. https://doi.org/10.1016/S0925-5273(02)00267-0
Copenhagen Economics. (2018). Main developments in the postal sector (2013–2016). Study for the European Commission, Directorate-General for Internal Market, Industry, Entrepreneurship and SMEs. https://op.europa.eu/en/publication-detail/-/publication/d22799b5-bbb7-11e8-99ee-01aa75ed71a1/ language-en
Dobrodolac, M., Lazarević, D., Švadlenka, L., & Živanović, M. (2016). A study on the competitive strategy of universal postal service provider. Technology Analysis & Strategic Management, 28(8), 935–949. https://doi.org/10.1080/09537325.2016.1180357
Ecommerce Europe. (2019). European Ecommerce Report. https://www.ecommerce-europe.eu/wp-content/uploads/2019/07/European_Ecommerce_report_2019_freeFinal-version.pdf
European Commission. (2019). Opening up the postal services markets. http://ec.europa.eu/competition/sectors/postal_services/overview_en.html
European Union. (2008). Directive 2008/6/EC of the European Parliament and of the Council of 20 February 2008. https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:02008L0006-20080227
Färe, R., Grosskopf, S., Norris, M., & Zhang, Z. (1994). Productivity growth, technical progress, and efficiency change in industrialized countries. The American Economic Review, 84(1), 66–83. https://www.jstor.org/stable/2117971
Filippini, M., & Zola, M. (2005). Economies of scale and cost efficiency in the postal services: Empirical evidence from Switzerland. Applied Economic Letters, 12(7), 437–441. https://doi.org/10.1080/13504850500109709
Fisher, I. (1922). The making of index numbers. Houghton Mifflin.
Frontier Economics. (2013). Study on the principles used to calculate the net costs of the postal USO – a report prepared for the European Commission. http://ec.europa.eu/internal_market/post/studies/index_en.htm
Grifell-Tatje, E., & Lovell, C. (2008). Productivity at the post: its drivers and its distribution. Journal of Regulatory Economics, 33(2), 133–158. https://doi.org/10.1007/s11149-007-9051-y
Horncastle, A., Jevons, D., Dudley, P., & Thanassoulis, E. (2006). Efficiency analysis of delivery offices in the postal sector using stochastic frontier and data envelopment analyses. In M. A. Crew, & P. R. Kleindorfer (Eds.), Liberalization of the postal and delivery sector (pp. 149–164). Edward Elgar.
Institute for the Future. (2003). Changing communications strategies – new roles for mail. http://www.iftf.org/uploads/media/SR785_B_ChangingCommStrategies.pdf
International Post Corporation. (2019). Strategic perspectives on the postal market. http://www.ipc.be/~/media/Documents/PUBLIC/Markets/Strategic%20Perspectives%202012%20FINAL.pdf
International Trade Statistics. (2019). ISO 3166-1 alpha-3 Country Codes. https://unstats.un.org/unsd/tradekb/knowledgebase/country-code
Iturralde, J. M., & Quiros, C. (2008). Analysis of efficiency of the European postal sector. International Journal of Production Economics, 114(1), 84–90. https://doi.org/10.1016/j.ijpe.2008.03.001
Jaag, K. (2014). Postal-sector policy: From monopoly to regulated competition and beyond. Utilities Policy, 31(SI), 266–277. https://doi.org/10.1016/j.jup.2014.03.002
Keh, H. T., & Chu, S. (2003). Retail productivity and scale economies at the firm level: A DEA approach. Omega, 31(2), 75–82. https://doi.org/10.1016/S0305-0483(02)00097-X
Kortelainen, M. (2008). Dynamic environmental performance analysis: A Malmquist index approach. Ecological Economics, 64(4), 701–715. https://doi.org/10.1016/j.ecolecon.2007.08.001
Kujacic, M., Blagojevic, M., Sarac, D., & Vesovic, V. (2015). The modified activity-based costing method in universal postal service area: Case study of the Montenegro post. Inzinerine Ekonomika-Engineering Economics, 26(2), 142–151. https://doi.org/10.5755/j01.ee.26.2.2818
Laspeyres, É. (1871). Die Berechnung einer mittleren Warenpreissteigerung. Jahrbücher für Nationalökonomie und Statistik / Journal of Economics and Statistics, 16, 296–314.
Malmquist, S. (1953). Index numbers and indifference surfaces. Trabajos de Estatistica, 4(2), 209–242. https://doi.org/10.1007/BF03006863
Mizutani, F., & Uranishi, S. (2003). The post office vs. parcel delivery companies: Competition effects on costs and productivity. Journal of Regulatory Economics, 23(3), 299–319. https://doi.org/10.1023/A:1023368327735
Nishimizu, M., & Page, J. M. (1982). Total factor productivity growth, technological progress and technical efficiency change: Dimensions of productivity change in Yugoslavia 1965–78. The Economic Journal, 92(368), 920–936. https://doi.org/10.2307/2232675
Odeck, J. (2006). Identifying traffic safety best practice: an application of DEA and Malmquist indices. Omega, 34(1), 28–40. https://doi.org/10.1016/j.omega.2004.07.017
Paasche, H. (1874). Ueber die Preisentwicklung der letzten Jahre nach den Hamburger Börsennotirungen. Jahrbücher für Nationalökonomie und Statistik / Journal of Economics and Statistics, 23(2–4), 168–178. https://doi.org/10.1515/jbnst-1874-0113
Perelman, S., & Pestieau, P. (1994). A comparative performance study of postal services: A productive efficiency approach. Annales d’Économie et de Statistique, 33, 187–202. https://doi.org/10.2307/20075942
Post & Parcel. (2019). Polish Post seeks central role in e-government services. http://postandparcel.info/54402/news/it/polish-post-seeks-central-role-in-e-government-services/
Quiros, C. (2011). Liberalization and efficiency in the European postal sector. Applied Economics Letters, 18(12), 1155–1158. https://doi.org/10.1080/13504851.2010.528350
Ralević, P. (2014). A model for designated operator resource optimization based on measuring the efficiency of postal services providing (Doctoral dissertation). University of Belgrade, Faculty of Transport and Traffic Engineering, Serbia). http://nardus.mpn.gov.rs/bitstream/handle/123456789/4212/Disertacija119.pdf?sequence=1&isAllowed=y
Ralević, P., Dobrodolac, M., & Marković, D. (2016). Using a nonparametric technique to measure the cost efficiency of postal delivery branches. Central European Journal of Operations Research, 24(3), 637–657. https://doi.org/10.1007/s10100-014-0369-0
Ralević, P., Dobrodolac, M., Marković, D., & Finger, M. (2014). Stability of the classifications of returns to scale in data envelopment analysis: A case study of the set of public postal operators. Acta Polytechnica Hungarica, 11(8), 177–196. https://www.uni-obuda.hu/journal/Ralevic_Dobrodolac_Markovic_Finger_54.pdf
Ralević, P., Dobrodolac, M., Marković, D., & Mladenović, S. (2015). The measurement of public postal operators’ profit efficiency by using data envelopment analysis (DEA): A case study of European Union member states and Serbia. Inzinerine Ekonomika-Engineering Economics, 26(2), 159–168. https://doi.org/10.5755/j01.ee.26.2.3360
Schuster, P. B. (2013). One for all and all for one: Privatization and universal service provision in the postal sector. Applied Economics, 45(26), 3667–3682. https://doi.org/10.1080/00036846.2012.727982
Solow, R. M. (1957). Technical change and the aggregate production function. The Review of Economics and Statistics, 39(3), 312–320. https://doi.org/10.2307/1926047
Tochkov, K. (2015). The efficiency of postal services in the age of market liberalization and the internet: Evidence from Central and Eastern Europe. Utilities Policy, 36, 35–42. https://doi.org/10.1016/j.jup.2015.09.004
Tone, K. (2001). A slacks-based measure of efficiency in data envelopment analysis. European Journal of Operational Research, 130(3), 498–509. https://doi.org/10.1016/S0377-2217(99)00407-5
Tone, K. (2002). A slacks-based measure of super-efficiency in data envelopment analysis. European Journal of Operational Research, 143(1), 32–41. https://doi.org/10.1016/S0377-2217(01)00324-1
Tone, K., & Tsutsui, M. (2009). Network DEA: A slacks-based measure approach. European Journal of Operational Research, 197(1), 243–252. https://doi.org/10.1016/j.ejor.2008.05.027
Törnqvist, L. (1936). The bank of Finland’s consumption price index. Bank of Finland Monthly Bulletin, 16(10), 1–8. https://helda.helsinki.fi/bof/bitstream/handle/123456789/10834/Bofbul_1936-10.pdf?sequence=1
Universal Postal Union. (2019). http://pls.upu.int/pls/ap/ssp_report.main?p_language=AN&p_choice=BROWSE
USPS. (2019). Funding the universal service obligation – RARC Report (Report Number RARCWP-16-005). United States Postal Services, Office of Inspector General. https://www.uspsoig.gov/sites/default/files/document-library-files/2016/RARC-WP-16-005.pdf
WIK. (2012). Summary of postal privatization in Europe & key lessons. http://www.wik.org/uploads/media/PLV_2012_04_06_Rutgers_Washington.pdf
Zhu, J. (1996). Data envelopment analysis with preference structure. Journal of the Operational Research Society, 47(1), 136–150. https://doi.org/10.1057/jors.1996.12
Zhu, J. (2003). Quantitative models for performance evaluation and benchmarking: Data envelopment analysis with spreadsheets and DEA excel solver. Kluwer Academic Publishers. https://doi.org/10.1007/978-1-4757-4246-6