estimation of economies of scale in banking using a generalized functional form this paper addresses four issues that arise in the estimation of economies of scale in the commercial banking industry first a common assumption underlying many of the studies of economies of scale in banking is the assumption of a cobb douglas production function with exogenous input prices the use of a cobb douglas production function facilitates the estimation of the output elasticity of cost however there does not appear to be any other reason a priori for such an assumption this paper utilizes a box cox hereafter b c generalized functional form methodology to directly test the assumption of an underlying cobb douglas production function second if the assumption of a cobb douglas production function is inappropriate as a description of the production process of the financial firm estimates of the output elasticity may be biased the sensitivity of the estimates of this elasticity to the choice of functional form can also be examined through the use of a generalized functional form methodology third no general consensus has been reached regarding the appropriate definition of bank output thus a diversity of measures of bank output have been employed in previous estimates of economies of scale in banking the sensitivity of the estimated output elasticity of cost to the selection of several alternative measures of output is examined through the use of the generalized functional form methodology finally the b c estimates of the cost function for commercial banks can be used

banking costs generalized functional forms and estimation of economies of scale and scope recently researchers have claimed that the primitive cobb douglas production technology captures banking cost functions adequately these findings rule out scope economies and u shaped cost curves the rejection of the generalized flexible form postulated by the above authors is a necessary but not a sufficient condition to justify a cobb douglas specification using restricted generalized functional forms the authors find that the composite output cobb douglas specification is an inadequate description of banking cost technology translog specifications with multiple products capture the data best suggesting the presence of both scope and scale economies copyright 1989 by ohio state university press

are airports engines of economic development a dynamic panel data approach this paper applies the dynamic panel data generalized method of moments estimator to the data on commercial passenger air traffic at all primary airports in the united states to evaluate the impact of traffic volume and number of destinations served with non stop flights on the key indicators of regional economic development we find that number of destinations served with non stop flights has a much clearer and more robust impact on level of employment number of business establishments and average wage in the region passenger traffic volume affects employment and average wage but not number of establishments at the sample median connecting a metropolitan statistical area with an extra destination keeping everything else constant creates 98 jobs and facilitates the opening of four new business establishments that employ people the corresponding numbers for the sample mean are 223 jobs and 15 businesses the impact of air travel on regional economic development is influenced by competition on the

imposing emission trading scheme on supply chain separate and joint implementation abstract in response to global warming it is urgent to control and reduce greenhouse gas ghg emissions especially from the supply chain perspective the most often discussed topic in this domain indicates that emission trading scheme ets could be employed as one of policy instruments for supply chain emissions management via mathematical models scholars have shown that the employment of emission trading is affecting supply chain performances both environmental and economic in different levels however previous literature focus on the cost effectiveness analysis only from the mathematical aspect to provide policy makers and companies with the theoretical bases on this hot topic it is significant to discuss how ets one of market based instruments could be imposed in the context of supply chain from the mechanical point of view by incorporating ideas from relevant literature this paper generates two concepts modes in imposing ets on supply chain jointly imposed supply chain emission trading e g jointly imposed sc ets and separately imposed supply chain emission trading e g separately imposed sc ets it illustrates the working principles of both concepts modes and conducts a sandbox example to analyze the cost effectiveness of them furthermore this paper discusses the challenges and opportunities of implementing two modes from practical aspects results of quantitative analysis and discussion show that for the sake of both policy makers and supply chain companies the separately imposed sc ets allowing selling permits would be so far the better mode to manage supply chain ghg emissions compared to the jointly imposed sc ets

the dominance of inefficiencies over scale and product mix economies in banking abstract this study measures and analyzes inefficiencies for all u s banks in 1984 inefficiencies are measured relative to a thick frontier cost function and are found to dominate measured scale and product mix economies most inefficiencies are operational in nature involving the overuse of physical inputs rather than financial involving overpayment of interest also technical inefficiencies proportionate overuse of all inputs dominate allocative inefficiencies improper mix of inputs these results suggest that competitive pressures in banking from deregulation will be focused primarily on banks that do not control costs rather than on those of a particular size or product mix

scale and scope economies in the multi product banking firm abstract the multi product nature of the banking firm is examined utilizing the translog cost function this analysis indicates that contrary to conventional wisdom natural monopoly scale economies and product specific decreasing costs are not robust characterizations of the banking industry there is however evidence that the cost function is characterized by economies of scope the implications of these results are discussed and extensions of this approach suggested

design of sustainable supply chains under the emission trading scheme increase in environmental concerns together with legislations are forcing industries to take a fresh look at the impact of their supply chain operations on the environment this paper introduces a mixed integer linear programming based framework for sustainable supply chain design that considers life cycle assessment lca principles in addition to the traditional material balance constraints at each node in the supply chain indeed the framework distinguishes between solid and liquid wastes as well as gaseous emissions due to various production processes and transportation systems the framework is used to evaluate the tradeoffs between economic and environmental objectives under various cost and operating strategies in the aluminum industry the results suggest that current legislation and emission trading schemes ets must be strengthened and harmonized at the global level in order to drive a meaningful environmental strategy moreover the model demonstrates that efficient carbon management strategies will help decision makers to achieve sustainability objectives in a cost effective manner

a note on cost structure and economies of scale in greek banking abstract this note studies the greek banking industry in 1980 1989 in order to estimate a representative cost structure functional form and search for economies of scale the constructed model uses a translogarithmic cost function that includes the size of assets capital labor and technological progress by using this model which has been used by benston et al 1982 hunter and timme 1986 and others we have been able to estimate for the first time an econometric form of the costs in greek banking and we have been able to investigate economies of scale in the greek banking industry although operating cost scale economies do exist total cost scale economies were not present this has been shown through the utilization of a large sample of pooled data of all greek banks for a period of ten years and the use of two other samples of large and small banks moreover by exploiting the properties of the model we shall be able to show whether technological progress has been a factor which lowers bank costs

scale economies in banking a restructuring and reassessment the issue of scale economies in banking has a rich history most earlier studies report modest operating cost scale economies for small institutions those with less than about 50 million of deposits in 1968 dollars but are unclear where these economies might end if at all unfortunately these studies are limited in four important respects first those that were well specified did not measure the total cost of banking operations but concentrated on estimating scale economies for individual banking functions e g demand deposits separately from commercial loans second an average cost curve that could take a u shape over the full range of banks was not fitted either because larger banks were not included or because of the functional form used cobb douglas consequently the optimum or minimum cost size of a bank or office could not be determined third the variables measuring the costs of branching were misspecified fourth the branch

economies of scale and economies of scope in multiproduct financial institutions a study of british columbia credit unions this paper investigates the production technology facing computerized credit unions in canada a full system of translog cost equations is estimated in order to test for economies of scale economies of scope and other production characteristics in a multiproduct context the regression results indicate that most of the credit unions in our sample experience significant increasing returns to scale as they expand their level of output there is also evidence of cost complementarity or economies of scope in their mortgage and other lending activities as a result legislation which limits the ability of credit unions to grow and diversify will likely raise the operating costs of this important group of financial institutions additional structural tests of the most general translog specification suggest that none of the restrictive production conditions commonly imposed by other researchers using cobb douglas and ces specifications provide a valid representation of credit union technology the results of many earlier studies are therefore open to question this paper presents a number of structural tests of the production technology facing large computerized credit unions in canada a full system of translog cost equations is estimated using detailed cross sectional data on british columbia credit unions the parameter estimates obtained from our multiproduct specification allow us to test for economies of scale economies of scope and factor substitution unlike many earlier studies the present paper introduces the various outputs as separate variables instead of crudely proxying them with a single output measure such as total assets the total number of loans or the number of depositors by explicitly recognizing the multiproduct nature of the intermediation process we are able to address more interesting production questions and remove some of the bias caused by misspecification and measurement error in simpler approaches the flexible translog specification allows us to estimate the sensitivity of costs to proportionate increases in all outputs economies of scale as well as the cost savings firms realize by producing several outputs jointly rather than specializing in the production of one economies of scope the test results reported in the latter part of the paper suggest that increasing returns to scale exist in almost all of the credit unions in our sample though

global reverse supply chain redesign for household plastic waste under the emission trading scheme with increasing global resource scarcity waste becomes a resource that can be managed globally a reverse supply chain network for waste recycling needs to process all the waste with minimum costs and environmental impact as re processing of waste is one of the major sources of pollution in the recycling processes a mechanism is needed to control and reduce the emission impact in the re processing as a key to facilitate the globalized reverse supply chain and avoid spreading pollutants overseas emission trading schemes ets can function as policy instruments for controlling emissions the ets introduces a trade off between the economic efficiency and the environmental impacts ets has been implemented in europe and is developing rapidly in china too the aim of the research is to re design a reverse supply chain from a global angle based on a case study conducted on household plastic waste distributed from europe to china emission trading restrictions are set on the processing plants in both europe and china we modeled a network optimization problem using integer programing approach allowing the re allocation of intermediate processing plants under emission trading restrictions optimization results show that global relocation of re processors leads to both a reduction of total costs and total transportation emission ets applied to re processors further helps to reduce emissions from both re processing and transportation sectors carbon cap should be carefully set in order to be effective with a given carbon cap the model also shows the effective carbon price range these results give an insight into the feasibility of building a global reverse supply chain for household plastic waste recycling and demonstrate the impact of ets on the network design

inventory management under joint product recovery and cap and trade constraints abstract the influence of environmental legislation in inventory control policies is explored previous work on product recovery is extended using the introduction of a cap and trade mechanism in an infinite horizon inventory system in which demand and returns are uncertain demand is met through two different sources namely manufacturing and remanufacturing which differ in cost and greenhouse gas emissions the main contributions of this paper are 1 comparison of system operation in terms of cost and environmental performance under conventional and green inventory policies and 2 managerial insights into the structure of green inventory policies to illustrate the impact of a cap and trade scheme a numerical example is used we solved the problem as a markov decision process and characterized the inventory policies based on the optimal replenishment strategy we also conducted a sensitivity analysis to examine the effect of underlying environmental parameters such as the emission cap and the allowance price in the policy structures the results indicate that decisions are sensitive to carbon prices the inventory policy could play an important role in compliance with environmental legislation although there is threshold carbon price beyond which the company must focus on strategic decisions rather than tactical decisions

airport expansions and property values the case of chicago o hare airport abstract the paper adds to the empirical literature by providing up to date estimates of the effect of airport noise on property values around one of the world s busiest airports chicago o hare the results indicate that home values were about 9 lower within a 65 db noise contour band of o hare in 1997 opponents of airport expansions argue that increased noise will reduce property values and lower tax bases the results of this paper suggest that aircraft are becoming so much quieter that the airport can be expanded without causing a drop in local property values or tax bases estimates suggest that house prices may rise by as much as 284 6 million in the densely populated area around o hare after a new runway is added to the airport

the multibank holding company effect on cost efficiency in banking abstract this paper tests the hypothesis that differences in the organizational form embodied in independent banks one bank holding companies and multibank holding companies result in differences in operating cost efficiency the transaction and agency cost paradigms for analysis of organizational efficiency provide theoretical motivation for the hypothesis the effects of organizational form on bank operating expenses for individual banks are evaluated on subsamples divided into quartiles based on total revenue results indicate that for banks having revenues in the lowest quartile both one bank and multibank holding company affiliates are cost efficient relative to independent banks multibank holding company affiliates are cost efficient relative to both one bank affiliates and independent banks for banks in the interquartile range no significant differences in cost efficiency are noted banks in the highest revenue quartile relative efficiency at the organizational level is also evaluated results provide evidence of lower operating costs for banking operations of both multibank and one bank holding company organizations relative to independent banks taken as a whole the results imply that holding company affiliation conveys cost advantages to banking units below the 75th revenue percentile

the technical efficiency of us banks abstract the paper uses a non parametric frontier approach to measure the technical efficiency of a sample of u s banks the results indicate that these banks could have produced the same level of output with only 70 of the inputs actually used in addition most of this inefficiency is due to pure technical inefficiency wasting inputs rather than scale inefficiency operating at non constant returns to scale finally regression analysis indicates that the technical efficiency of the banks is positively related to size negatively related to product diversity and not at all related to the extent to which branch banking is allowed

economies of superscale in commercial banking most previous studies of scale economies in banking have excluded banks larger than 1 billion in assets thus study by contrast estimates cost functions for the 100 largest us commercial banks hedonic terms are incorporated to correct for the aggregated nature of the call report data available for these banks in addition we attempt to quantify the cost benefit of diversification in the model we estimate efficient bank scale to range from 15 billion to 37 billion in total assets a thousandfold increase over some previous findings these results are supported by comparison of actual average costs as well as by casual historical observation and the level of widespread concern over interstate banking our findings suggest some cost incentive or benefit to expansion or consolidation among large regional banks including interstate expansion or consolidation

emission policies and their analysis for the design of hybrid and dedicated closed loop supply chains abstract government legislation and consumer awareness on carbon emissions have required industries to seek alternative ways to reorganize their supply chains therefore industries have to consider not only the activities in the forward supply chain but also in the reverse supply chain an integrated supply chain that combines the activities of both the forward and reverse supply chains is referred to as the closed loop supply chain clsc there are two main types of clsc structures hybrid and dedicated in this research we analyze the effect of carbon emissions consideration on the design of both hybrid and dedicated clscs in particular we develop a set of integrated mixed integer linear programming milp models to quantify and compare both of the environmental and economic impacts of carbon emissions policies carbon cap carbon tax and carbon cap and trade and market factors scale effect product return rate and the customer demand on the design of clscs with respect to both clsc structures our analysis shows that when market conditions are considered total cost and total emissions are more sensitive to customer demand than to the scale effect and the product return rate when an industry faces fluctuation on the quantity of the returned products adopting a dedicated clsc would lead to a lower total cost under cap and trade policy dedicated clsc can produce less total emissions we also observe that dedicated clsc is more cost efficient under carbon cap policy and hybrid clsc is more emissions efficient when the carbon tax is introduced

a reexamination of economies of scale in banking using a generalized functional form note using a sample of 1 205 unit banks for the years 1972 77 clark 1984 addresses a number of critical issues in ascertaining the nature of the cost function underlying the banking industry the generalized functional form methodology used by clark is ideal for empirically analyzing these questions this paper addresses three issues evolving from clark s study first a number of econometric problems that were not addressed by clark can arise in the application of the functional form method since the findings of clark have major implications for the question of scale economies in banking it is important to verify that these findings are not an econometric artifact second and more importantly the major modifications that have occurred in the structure of the banking industry during the past few years suggest that the corresponding operating parameters may have changed substantially from those in clark s 1972 77 sample finally previous literature has debated the relative scale economies of independent banks versus multi bank holding company mbhc affiliates the methodology of clark provides a unique opportunity to extend previous research on this issue

an empirical study of joint production and scale economies in commercial banking this paper utilizes the translog cost function to test the proposition that the bank productionfunction is characterized by jointness the cross section analysis for the years 1973 through 1978 indicates that bank production is in fact characterized by jointness this result calls into question the findings and implications of studies that utilize the assumption of non jointness in production since virtually all of the major bank cost studies employ the assumption of nonjointness the second part of our analysis examines scale economies for the banking firm while allowing for jointness in production our estimates indicate that scale economies characterize bank production at only small bank sizes and that the cost structure of large banks is characterized by diseconomies of scale

public sector capital and the productivity puzzle a number of studies have suggested a quantitatively important relationship between public sector capital accumulation and private sector productivity with the most compelling evidence derived from analyses of state level data estimates herein of production functions that use standard techniques to control for unobserved state specific characteristics however reveal essentially no role for public sector capital in affecting private sector productivity only estimates of state production functions that do not include such controls find substantial productivity impacts this result reconciles existing econometric estimates with the findings of hulten and schwab based on growth accounting techniques as such techniques effectively control for state specific effects region level estimates are essentially identical to those from state data suggesting no quantitatively important spillover effects across states copyright 1994 by mit press

technical change organizational form and the structure of bank production of those technological characteristics related to the nature of competition among firms in an industry or market scale economies and technical change are especially important economies of scale are said to exist when an equiproportional increase in all inputs results in a greater than proportional increase in output or equivalently when an increase in output at constant input prices leads to a less than proportional increase in total costs thus average costs decline as output expands depending upon the extent to which costs decline as output increases regulation of the firms in the industry may be necessary l the literature analyzing scale economies in commercial banking is voluminous the early studies on scale economies in banking include those by benston 1965 1972 greenbaum 1967 murphy 1972 and bell and murphy 1968 more recent studies include those by benston hanweck and humphrey 1982 and clark 1984 2 this literature has established that mild scale economies exist in bank

airfreight transport and economic development an examination of causality the paper examines the potential role that airfreight transport in the us can play in stimulating local and regional economic development the analysis examines trends in employment and income for metropolitan statistical areas that make use of airfreight services the focus is on causality and not on simple correlation and uses econometric analysis rather than simpler economic multiplier approaches granger causality testing based on panel data covering 35 airport and 32 metropolitan statistical areas in the us from 1990 to 2009 indicates that airfreight transport was a positive driver for local economic development the conclusions focus on the strengths but also the weaknesses of the methodology for assessing causality

is public expenditure productive abstract this paper considers the relationship between aggregate productivity and stock and flow government spending variables the empirical results indicate that i the nonmilitary public capital stock is dramatically more important in determining productivity than is either the flow of nonmilitary or military spending ii military capital bears little relation to productivity and iii a core infrastructure of streets highways airports mass transit sewers water systems etc has most explanatory power for productivity the paper also suggests an important role for the net public capital stock in the productivity slowdown of the last fifteen years

returns to scale and input substitution for large u s banks the united states commercial banking industry has experienced significant changes in recent years the recent wave of mergers and the near term prospects of interstate banking suggests that the industry is moving toward much larger average banking organizations rhoades 1985 will a more concentrated banking industry result in lower costs due to scale economies we address this question by examining the cost function for large banks numerous studies of economies of scale in banking exist generally tracing their roots to the classic papers by benston 1965 and bell and murphy 1968 a good review of the most recent studies can be found in clark 1988 the majority of the papers uses samples of smaller banks that is under 1 billion in deposits finding generally that economies of scale are quickly exhausted and that further increases in bank size occur at constant or possibly increasing cost the extrapolation of previous findings for samples of smaller banks to large banks may be problematic especially in the current environment first large banks service a different mix of markets and customers than small banks suggesting that large and small banks probably face different cost structures second the process of deregulation may have rendered the results of prior studies moot since the data pertain to periods before significant deregulation since we

international comparison of bank production characteristics and technological change in this paper we conduct an international comparison of bank production and technological characteristics the comparison is performed using novel evidence on changes in labour demand over the period 1980 89 for banks headquartered in canada france west germany italy japan and the united states the results suggest that there is relatively low substitutability of labour for capital in the production process of these banking organizations significant scale economies were found with regards to the expansion of output and the concomitant increase in labour in addition technological change operated to lower the quantity of inputs needed to produce a given level of outputs and increased the minimum efficient size bank over the sample period many of the production characteristics and technology effects varied significantly across countries these findings imply that intercountry differences in production characteristics and technological change should be explicitly recognized in bank strategic planning

hubs and high fares dominance and market power in the u s airline industry this article estimates the importance of route and airport dominance in determining the degree of market power exercised by an airline the results indicate that an airline s share of passengers on a route and at the endpoint airports significantly influences its ability to mark up price above cost the high markups of a dominant airline however do not create much of an umbrella effect from which carriers with smaller operations in the same markets can benefit the article suggests a number of possible explanations for this asymmetry

airline traffic and urban economic development this paper provides new evidence on the link between airline traffic and employment in us metropolitan areas the evidence confirms the common view that good airline service is an important factor in urban economic development frequent service to a variety of destinations reflected in a high level of passenger enplanements facilitates easy face to face contact with businesses in other cities attracting new firms to the metro area and stimulating employment at established enterprises the empirical results show that a 10 per cent increase in passenger enplanements in a metro area leads approximately to a 1 per cent increase in employment in service related industries however airline traffic has no effect on manufacturing and other goods related employment suggesting that air travel is less important for such firms than for service related businesses these estimates are generated controlling for reverse causality between employment and traffic the results imply that expansion of chicago s o hare ai

impact of government financial intervention on competition among green supply chains abstract this work analyzes the effects of governmental financial intervention on green supply chain competition using a three stage game theoretic model nash equilibrium solutions for governmental and chain member decisions are derived analytical results suggest that the government should adopt green taxation and subsidization to ensure that green profit attributed to green product production is non negative strategically low wholesale price strategies are suggested to recycled component suppliers under green subsidization to stimulate manufacturers intention of green product production under green taxation numerical results reveal that under equilibrium conditions social welfare and chain based profits improve by 27 8 and 306 6 respectively compared with the case without financial intervention

the impact of carbon pricing on a closed loop supply chain an australian case study concerns about industrial and supply chain implications on our natural environment have existed for decades climate change and greenhouse gas emissions have caused countries to implement various instruments ranging from taxes permits and voluntary incentives to required regulatory policies given this environment we develop a unified optimization model for a closed loop supply chain in which the carbon emission is expressed in terms of dollar carbon cost this study is one of the first to evaluate the forward and reverse supply chain influences on the carbon footprint a comparative analysis is completed with a decomposition of cost and environmental influences across supply chain functions we utilize data from a company located in australia where the government is currently introducing a carbon pricing scheme we find that variations in cost and environmental impacts occur over ranges of carbon pricing characteristics and patterns of the numerical results over these ranges provide insights for corporate key strategies and potential additional government policies these results and implications are analyzed along with limitations and directions for future research

the efficacy of the european union emissions trading scheme depicting the co movement of carbon assets and energy commodities through wavelet decomposition abstract environmental system thresholds have been crossed for a number of dimensions of global environmental pollution such as greenhouse gas emissions under this scenario institutions and corporations are required to implement sustainable policies as a condition for humanity staying within planetary boundaries accordingly the european union created the largest emissions trading scheme in the world with the aim of properly managing corporations carbon dioxide reductions this paper aims to contribute to the literature focused on testing the effectiveness of institutional environmental management policies specifically this research evaluates whether the objectives of the european union emissions trading scheme are partially achieved by analyzing the dynamics of carbon assets and the main energy commodities worldwide this paper provides relevant information both for policy makers and company managers so that contributions towards the common goal of developing a clean energy future and curbing climate change are ameliorated based on wavelet coherence analysis this paper proposes a model free way of estimating the time varying correlations between carbon assets and energy commodities at both high and low frequencies our central results reveal that carbon assets and energy commodities present a changing lead lag behavior at different frequencies the energy commodities lead the european union allowances returns at medium frequencies but the contrary was true for the highest investment horizons this finding should be in line with the goal of significantly reducing emissions because during long cycles if the majority of companies have not switched to cleaner industrial processes they must buy more carbon assets increasing their prices in that case energy commodities would be more expensive because of the energy commodities market behavior during long term horizons with european union allowances lead the certified emissions reductions lead in a negative way most of the energy commodities at medium frequencies thus indicating that investors handling energy commodities oriented portfolios could incorporate the mentioned carbon assets for diversification purposes these specific findings suggest that polluting activities would be more expensive which would provide an incentive to companies to implement environmentally friendly industrial processes the european union emissions trading scheme can result in significant emission reductions and compliance of the european union with the objectives of the kyoto protocol

the dominant firm advantage in multiproduct industries evidence from the u s airlines in many industries the largest firms are most successful in entering and competing in individual markets or submarkets while this success is often attributed to cost or quality differences it may also reflect reputation advantages or marketing strategies that benefit firms selling a wider variety of products in the industry i present an approach to estimating the advantages of a dominant firm in the airline industry that allows one to effectively control for cost and quality heterogeneity results using data from 1986 indicate that an airline with a dominant presence at an airport will have a significant advantage in attracting customers whose trips originate at that airport regardless of the specific route on which the customer is traveling