The temporal behavior of scale economies within A banking firm

Examining the time path of the scale economies has not received much attention until recently. Moreover, the time path of scale economies for a given firm has not been studied in the banking literature at all. Examining scale economies, either from cross-sectional or panel data, based only on a single estimate ignores the dynamic behavior (both cost- and production-wise) of a banking firm as well as of the banking industry. We study the time-varying scale economies of commercial banking firms. We employ the Kalman-filter approach in estimating the translog cost function. The Kalman filter allows the parameters of the translog cost function and therefore the scale economies to be time dependent and varying. The estimation results indicate significant variation in inter- and within-firm scale economies over time for sample banks.     

On exploiting scale economies

Indivisibilities give rise to scale economies in the provision of many local public services. Exploitation of these scale economies often requires that the activities of several communities be coordinated. In this study we analyze the game analog to a simple waste collection system in order to determine the requirements for the design of a financing system that will sustain optimal participation in a regional service system plan. We find that market based pricing in the face of scale economies created by indivisibilities will generally not support an optimal partition of communities into service districts. We also find that characterization of the game structure of local public service delivery systems is feasible and provides information for designing appropriate cost-sharing arrangements.     

Heterogeneity of technological regimes and banking efficiency in former socialist economies

Cost efficiency of banks in 20 former socialist emerging economies is analyzed using a latent class stochastic efficiency frontier model that explicitly accounts for unobserved differences in technological regimes due to the heterogeneity of economic environments in which the banks are operating. We find that banking systems in former socialist emerging economies are characterized by three distinct technological regimes. Based on the estimated efficiency scores we group the countries into three categories and provide an intuitive interpretation of these three regimes.     

Economies of scale and organization efficiency in banking

Previous studies attempting to assess economies of scale in banking firms have largely relied upon cost functions. The profit-function approach enjoys several important advantages over the cost-function method, consequently that is the approach used in this study. A risk-adjusted profit function estimates economies of scale of unit and branch banks; and the effects of bank holding-company affiliation on the level of bank profits is also examined. The results indicate larger economies of scale for branch banks than for unit banks; and bank holding-company affiliates were found to be more efficient than independent banks.     

Capital-tax financing and scale economies in public-input production

Contrary to the dominant view of inefficient tax competition, Oates and Schwab (1991) show that capital-tax financing of public inputs leads to efficiency when the supply of these inputs is conditioned on business investment (Oates, W.E., Schwab, R.M., 1991. The allocative and distributive implications of local fiscal competition). This paper demonstrates that the cost structure of public-input production is relevant to their proposition on efficient capital-tax financing. That proposition holds if the per-unit cost of public inputs is exogenously fixed; however, it does not hold if public-input production exhibits scale economies. Also, this paper compares our analysis with the Zodrow-Mieszkowski model. That comparison illustrates the importance of the way public inputs are rationed to private firms.     

Potential economies of scale at the University of Bradford

The paper applies output budgeting techniques to the “production” of graduates at a British University. The cost per student graduated in 18 different disciplines is first divided between: (1) capital and maintenance costs, (2) teaching costs, and (3) administrative and general expenditures. Techniques are devised so as to allocate expenditures under these heads to individual students. Examples are given to show that: (1) academic staff costs per student can be cut by ca. 30 per cent with a doubling of enrolment, and that (2) total costs per student in scientific disciplines can be reduced by up to 25 per cent through a more intensive use of laboratories with little or no deterioration in the quality of instruction or in staff workloads. By contrast, more efficient use of classroom hours and seats available shows much lower potential economies, as do changes in student contact hours, size of teaching group and range of optional subjects.The article is directed towards those concerned with planning university resource use.     

Economies of scale and scope in French commercial banking industry

This paper presents estimations of economies of scale and scope in the French banking industry. Using a translog model of bank costs, the paper demonstrates the existence of economies of scale for French banks, particularly in what concerns operating costs. Economies of scale are observed in all classes of bank size. Results also suggest that cost subadditivity exists in the French banking industry.     

Scope and scale economies in merging hospitals prior to merger

During the 1980s, the impact of the Prospective Payment System and increased pressure from payers for discounts placed pressure on hospitals to become more efficient. An increase in the number of hospital mergers during this period suggests that merger was a strategy used by hospitals to improve efficiency. This hypothesis is tested by estimating multiproduct scope and scale economies in merging hospitals one year prior to the merger and comparing these with a group of controls using estimates from a hybrid translog cost function. Diseconomies of scale were present when the estimated hybrid translog cost function is evaluated at variable means. The results suggest that merging hospitals could obtain operational efficiencies through merger.     

A general equilibrium model with external scale economies in production

A general-equilibrium model of an urban economy is described. The standard residential land use model is extended to include a well-defined production/employment sector. External scale economies occur in the production of the city's export good. The model is designed for the numerical computation of equilibria and optima.     

Privatization in transition economies: Privatization scale and country size

This paper examines determinants of privatization in transition countries. Empirical studies of privatization are few and even fewer formal empirical analyses of privatization in transition countries exist. Another goal is to examine differences between large-scale and small-scale privatization. We find that scales of privatization respond differently to various determinants. Particularly, privatization scales are sensitive to changes in economic prosperity, unemployment, and inflation. Country size, not government size, seems to be driving privatization in transition countries. Effects of Soviet legacy are non-existent. Some findings are unique to the literature, while others differ from existing studies. Policy implications are discussed.     

Rate of return analysis and economies of scale in higher education

This paper presents the results of a study of the rate of return on undergraduate education at the University of Bradford, United Kingdom, and compares them with returns calculated independently for the U.K. university system as a whole. Rates of return are measured for separate undergraduate courses and considerable variation is shown, courses in science and technology generally having lower return because of their higher costs. Private returns to the individual graduate are shown to be substantially greater than those to society as a whole. The government's return, in the form of increased tax receipts is shown to be positive. Further results demonstrate increasing marginal rates of return to society as a result of the economies of scale associated with the expansion of enrolment planned for the decade 1971–1981. The problems involved in projecting rates of return into the future are considered.The paper is directed to teachers and students of the economics of education.     

Economies of scale and scope in French banking and savings institutions

In this study, we analyze the costs incurred by French commercial banks and savings institutions. One of the main distinctions between these two types of financial entities concerns management costs, which are higher for commercial bank demand deposits than for the savings institutions' tax-free livret A passbook accounts. Taking this differential into consideration by constructing separate models based on different principles, we find that the average overall and operating costs of the savings institutions are half those of commercial banks. As regards operating costs, small savings institutions enjoy a significant cost advantage over small commercial banks, but this cost advantage is smaller when one compares the performance of large savings institutions to the large banks. The results of our econometric estimates suggest a possible explanation, as we find increasing returns to scale for the banks and diminishing returns for the savings institutions. The value of the returns-to-scope parameter at the mean point appears to indicate a complementarity between certain pairs of outputs. Therefore, ouptut diversification appears to have a positive impact on cost levels for both savings institutions and commercial banks; while institution size, measured by the total assets, has a different impact in these two industries.     

Estimating scale economies in financial intermediation: a doubly indirect inference

This paper provides a vertically integrated modelling of the financial production process. In a first stage the activity of commercial banks or insurance companies embodies some technical and commercial aspects such as services to depositors or mutualization of risk through distribution of contracts of insurance. In the second stage banks are involved in the intermediation activity. By using a simulation and the doubly indirect inference method for the estimation we were able to resolve two main econometric problems: decomposition of aggregated data over two vertically integrated stages of production and inconsistency of the estimators due to endogeneity and misspecification. An application to French Banking industry is provided.     

Public spending and economies of scale in partial fiscal decentralized governments: The case of Chile

This article evaluates economies of scale in local public spending in Chile, emphasizing the country's geographical features and high fiscal heterogeneity. We leverage balanced panel data for ten years and 307 municipalities in order to estimate the population level at which a reduction in the average cost of local public goods provision occurs and to differentiate between levels of market potential. We follow a theoretical model of cost efficiency that considers spatial interactions and spillover effects among neighboring jurisdictions. Our findings suggest that Chilean municipalities reach an optimum population level at around 700,000 inhabitants, which is high considering that only two cities qualify. When differentiating for levels of economies of scale according to levels of market potential, municipalities with a low potential reach their optimum at around 28,000 inhabitants, those with a medium potential reach it at approximately 124,000, and those with a high potential reach it at approximately 680,000.     

A monopolistic-competition model of international trade with external economies of scale

This paper presents a two-country model of monopolistic competition in which differentiated products are produced subject to external economies of scale and two countries differ only in size measured by the factor endowment. It is shown that under free trade, the larger country has positive net exports of differentiated products, which leads to its gains from trade, while the smaller country may lose from trade. Noteworthy is that the industrial agglomeration induced by inter-industry trade is possibly harmful to both countries if the two countries are similar in size and the taste for product diversity is sufficiently strong.     

Is population scale a worthless surrogate for business agglomeration economies?

Carlino argues that population scale has a negative effect on productivity because it is a diseconomy rather than an economy of agglomeration. This study arrives at different conclusions. After critiquing Carlino's arguments, empirical cross-sectional productivity equations show that capital intensity accounts for much of the urban productivity advantage. Measures of business services, localization effects, congestion, infrastructure, and labor quality are then included in the equations. These variables generally have the expected effect on productivity and are frequently significant. Nevertheless, population scale continues to have a positive effect in five industries; it develops a negative effect in only one.     

The effect of economic growth on banking system performance: An interregional and comparative study of Sub-Saharan Africa and developed economies

As an important part of the financial sector, banking systems play a critical role in economic development as well as in improving the quality of life of the people of sub-Saharan Africa (SSA). However, little evidence exists in the literature about the performance of the banking systems in SSA compared with developed economies. This paper investigates the effects of economic development on banking performance across 23 SSA countries and 14 developed countries between 1981 and 2018. Using estimation models such as feasible general least squares, fixed-effects estimation with Driscoll-Kraay standard errors, and system and difference generalized method of moments, our findings show that in SSA as a whole, economic development has a positive impact on commercial bank lending, raises lending rates, increases the amount of domestic credit to the private sector (DCPS), and reduces the number of nonperforming loans (NPLs). In developed countries, economic development has a positive impact on lending rates, DCPS, and the number of NPLs. However, although economic development in developed economies has mostly positive effects on banking performance, SSA countries have more performance issues in banking as a whole and in regional pockets. A careful reassessment of SSA’s interregional banking system is therefore highly recommended. An increase in the number of NPLs in East and Southern Africa, a decline in deposit rates offered in Southern, West, and Central Africa, and increasing real interest rates in SSA despite economic growth are some of the concerns that require careful reassessment and policy adjustments.     

The size of the firm in a transitional economy: Downsizing and economies of scale: The case of Russian footwear

Did Russian reforms alter the privileged position enjoyed in Soviet times by large firms? This paper considers the size of firms in one industry (footwear) during the years 1992–2000 and its relation to productivity. Soviet footwear firms were much larger than their foreign counterparts. With the transition to a market-based economy these large firms might lose their advantage relative to smaller firms. This study finds that while firms in each size category in this industry did substantially downsize, this process did not significantly affect relative productivities. It does not appear that larger firms created in Soviet times were relatively disadvantaged.