| The United States has a rich merchant shipping history. During the first part of the country's history, American-built and operated vessels were second to none. They were reliant and efficient. As technology and economic conditions changed, the U.S. began to lose its competitiveness in merchant shipping. In the interest of maintaining this industry for economic and national security reasons, the government of the United States passed a aeries of acts, designed to promote U.S. merchant shipping.; In the 1970s and 1980s, many policy makers still regarded U.S. merchant shipping as a vital industry, an important component of free trade, and a necessary element of the nation's defense. Consequently, the industry was the recipient of a number of subsidy programs---the effects of which directly affected the types of decisions each firm made in the purchase of inputs. These subsidy programs have had a number of unintended consequences, particularly with regards to the productive efficiency of the U.S. firms providing the capacity.; This study established a stochastic frontier framework to estimate the productive efficiency of the liner component of the subsidized U.S. maritime industry. This stochastic frontier framework also allowed for the estimation of the magnitudes and significance of the various factors that may contribute to an operating unit's daily costs. Empirically, this study found that the industry's average level of productive inefficiency is positive. In addition, it demonstrated that quantity transported, price of labor, price of fuel, price of cargo handling, and price of capital were significant explanatory factors in the cost relationship of a subsidized U.S. liner vessel. It also found that in certain circumstances, the trade route upon which the subsidized vessel operated was a significant explanatory factor in the cost relationship.; The study also identified and tested several factors which were hypothesized to contribute to the positive productive inefficiency of a subsidized operating unit. These factors included subsidies, managerial and operating issues, and degree of competition. Using the two-stage least squares econometric technique, this study found that subsidies and, in certain cases, managerial and operational issues were significant explanatory factors in the determination of an operating unit's level of inefficiency. |
