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

regulation and efficiency in transition the case of telecommunications in italy abstract in regulating the telecommunications industry the separation between network and retail functions which is designed to countervail the market power of incumbent operators is a relevant issue despite its importance little empirical research has addressed the effects of such a separation accordingly this paper provides insights into the consequences of the italian communications regulatory authority s agcom decision to impose this type of separation on the incumbent telecommunications operator telecom italia in particular the studied separation is between the firm s network related functions and those used for provision of its communication services the present research finds that the type of separation implemented by agcom allows a provider to maintain the advantages of operational scale in its network structure without dampening competition in the existing market for communications services the study also offers further empirical evidence on the advantages of a composite vs translog function in analyzing the multiproduct cost structure of a telecommunications operator

a test for subadditivity of the cost function with an application to the bell system stable url http links jstor org sici sici 0002 8282 28198409 2974 3a4 3c615 3aatfsot 3e2 0 co 3b2 rthe american economic review is currently published by american economic association your use of the jstor archive indicates your acceptance of jstor s terms and conditions of use available athttp www jstor org about terms html jstor s terms and conditions of use provides in part that unless you have obtainedprior permission you may not download an entire issue of a journal or multiple copies of articles and you may use content inthe jstor archive only for your personal non commercial use please contact the publisher regarding any further use of this work publisher contact information may be obtained athttp www jstor org journals aea html each copy of any part of a jstor transmission must contain the same copyright notice that appears on the screen or printedpage of such transmission the jstor archive is a trusted digital repository providing for long term preservation and access to leading academicjournals and scholarly literature from around the world the archive is supported by libraries scholarly societies publishers and foundations it is an initiative of jstor a not for profit organization with a mission to help the scholarly community takeadvantage of advances in technology for more information regarding jstor please contact support jstor org http www jstor orgmon jul 2 16 52 19 2007

producer subsidy equivalents for russian agriculture estimation and interpretation in this paper we present estimates of producer subsidy equivalents pses for russian agriculture over the 1992 94 period the estimated values are highly negative indicating that russian agriculture has been heavily taxed two types of taxation have been at work first government trade and price policies at the regional as well as the federal level have operated to keep domestic producer prices below world prices second deficient russian physical and institutional infrastructure has resulted in high domestic transaction costs for russian agricultural output since in competing with goods on the world market russian producers must bear all the costs of getting their output to final users the high transaction costs in an economic sense also tax domestic production the pse methodology was created to measure the effect on agricultural prices and incomes of government policies targeted specifically at agriculture to be consistent with standard methodology one should subtract out from the initial price gap estimates for russian agricultural output that part of the price differential caused by deficient domestic infrastructure an alternative approach though is based on recognition that the deficient infrastructure was in

economies of vertical integration in the swiss electricity sector over the last two decades several european nations have introduced reforms to their electricity sector generally these reforms require a legal and functional unbundling of vertically integrated companies these unbundling processes may reduce the possibilities that exist to fruitfully exploit the advantages of vertical integration the goal of this paper is to empirically analyze the presence of economies of scale and vertical integration in the swiss electricity sector economies of vertical integration between electricity production and distribution result from reduced transaction costs better coordination of highly specific and interdependent investments and less financial risk different econometric specifications for panel data including a random effects and a random coefficients model have been used to estimate a quadratic multi stage cost function for a sample of electricity companies the empirical results reflect the presence of considerable economies of vertical integration and economies of scale for most of the companies considered in the analysis moreover the results suggest a variation in economies of vertical integration across companies due to unobserved heterogeneity

a welfare analysis of canadian chartered bank mergers an econometric model of canada s five largest banks is estimated using time series data from 1976 to 1996 the principal findings are that chartered bank technology is characterized by increasing returns to scale scale efficiency is sufficiently large to offset the consequences of reduced competition that might have arisen from a merger between bank of montreal and royal bank of canada canadian imperial bank of commerce and toronto dominion bank or both the estimated model predicts that all the mergers proposed in 1998 would have led to slightly lower prices and consequently to an increase in consumer welfare une analyse de bien etre des fusions des banques a charte canadiennes l auteur calibre un modele econometrique des cinq plus grandes banques a charte au canada a l aide de series chronologiques de 1976 a 1996 les principaux resultats montrent que la technologie des banques a charte a des rendements croissants a l echelle ces rendements a l echelle sont suffisamment importants pour compenser les effets de reduction de la concurrence qui auraient pu se produire en consequence de la fusion de la banque de montreal et la banque royale de la banque imperiale de commerce et de la banque toronto dominion ou des deux le modele suggere que toutes les fusions proposees en 1998 auraient entraine des prix legerement plus bas et en consequence un accroissement dans le niveau de bien etre des consommateurs

the composite cost function and efficiency in giant japanese banks abstract this study provides further empirical investigation in the context of giant japanese banks of the recent claim by pulley and braunstein 1992 a composite cost function for multiproduct firms with an application to economies of scope in banking review of economics and statistics 74 221 230 that their new composite model for the multiproduct cost function has important advantages over the separable quadratic generalized translog and standard translog models in addition to assessing the composite model s relative ability in measuring global scope and scale economies the study also extends the p b analysis to assess measurement of product specific scope and scale economies pairwise cost complementarities between outputs changes in the marginal costs of outputs and technological change the results appear to confirm p b s chain the persistent finding of scale economies for large japanese banks is also investigated and confirmed

the contribution of product mix versus efficiency and technical change in us banking abstract similar to a du pont analysis this paper divides the changes in returns on assets of us commercial banks for the period from 2000 to 2005 into conventional measures of bank performance the contribution of product mix is significant and offsets losses from technical change and operating efficiency banks respond to changes in the business environment by switching towards more lucrative traditional and nontraditional products large banks are found to benefit more than community banks from the switch to an optimal output portfolio mix including new products spawned by recent financial innovations and deregulation

economic cost scale efficiency and competitive viability in banking this paper addresses the issue of the competitive viability of banks of different scales and scopes of operation and the implications that this may have for the evolving structure of the banking and financial services industry unlike previous papers this paper is the first to include both production and opportunity costs in an empirical evaluation of bank efficiency no consistent evidence is reported to suggest that banking organizations can achieve further gains in either production or economic efficiency by expanding beyond 2 billion dollars of total assets thus it is likely that smaller less diversified banking organizations will remain competitively viable copyright 1996 by ohio state university press

cost structure and capacity utilisation in multi product industries an application to the basque trawl industry to empirically study production structure and the capacity level at which vessels are harvesting a short run translog cost function is estimated from the estimated parameters two capacity utilisation measures are calculated ray returns to scale and a dual capacity utilisation measure both capacity utilisation measures suggest that there is excess capacity in the basque trawler fleet these measures are also estimated annually and they indicate the same conclusion the basque trawler fleet can therefore gain from increased production levels

vertical economies in electric power evidence on integration and its alternatives abstract the restructuring of the electric power industry raises questions about the possible sacrifice of economies previously secured by integrating generation with downstream transmission and distribution this study utilizes a data set of u s electric utilities that differ widely in their degree of vertical integration in order to model estimate and measure such economies cost savings from vertical integration are found to be quite substantial for all but the smallest utilities and are largest for those that are nearly fully integrated the study goes on to investigate alternatives to sources of and determinants of vertical integration among other findings it appears that some holding companies achieve economies comparable to those from vertical integration

diversification strategies and scope economies evidence from a sample of italian regional bus transport providers a growing number of local public transport lpt companies diversify their production lines by providing a large set of services we investigate the cost structure of a sample of lpt companies operating in italy and assess the presence and the magnitude of scope economies we split the whole sample of firms according to their diversification strategy private firms mainly diversifying in competitive transport related services and public firms providing nontransport services in regulated markets scope economies appear sizeable for both groups but higher for firms pursuing a transport related strategy suggesting caution in the multiutility development pursued by public lpt firms in italy

the costs of water pollution regulation in the pulp and paper industry this paper studies plant level data on actual and permitted levels of water pollution emissions for the pulp and paper industry there is widespread and substantial overcompliance with the relevant regulations aggregate bod emissions in 1992 were only 50 of the amount allowed overcompliance appears to imply a zero marginal abatement cost and its prevalence therefore has the potential to substantially change the debate over the costs of regulation we show instead that plants incurred substantial costs to overcomply marginal abatement costs were roughly 13 000 ton in 1992 we discuss possible explanations for costly overcompliance and their implications for estimation

tariff structure of japanese electric power companies an empirical analysis using dea this research explores a marginal cost mc based pricing system using data envelopment analysis dea this dea technique is widely applied for performance analysis and efficiency measurement in public and private sectors this article does not follow such a previous research direction rather directing itself towards the new measurement of mc and ramsey prices of multiple electric power services as an important case study this research applies the proposed dea approach to examine how much the current tariffs of japanese electric power services deviate from these mc and ramsey prices this type of research has never been explored in japan even though such a research effort is needed by many policy makers and consumers it is hoped that our empirical findings can serve as a policy making basis for guiding the japanese electric power industry this study believes that this japanese experience is useful for other nations such as asia pacific countries where many public industries are regulated by their governments

economies of scope of lending and mobilizing deposits in microfinance institutions a semiparametric analysis microfinance emerged as an innovation in lending to the rural poor in asia and in response to frequent failure of previous interventions in rural financial markets such as directed and subsidized production credit disbursed by agricultural development banks while it started as a collection of banking practices built around providing small loans typically without collateral and accepting tiny savings deposits armendariz de aghion and morduch 2005 p 1 today many microfinance institutions mfis expand their services and strive to offer payment and savings facilities insurance housing and longer term loans to marginalized clientele in rural and urban settings estimates show that there are at least 10 000 microfinance programs worldwide two related and important trends are now emerging the first is toward commercialization which essentially is transforming ngo mfis into regulated intermediaries with the intent to lower costs by accessing deposits as well as strengthen the organizations by privatization the second trend is a renewed interest in experimentation to mobilize savings with emphasis on rural savings economies of scope imply that expansion into the savings market can be more cost efficient if done by the same mfis which makes it a significant factor in assessing the feasibility of these innovations however there are few studies that estimate the magnitude and sign of scope economies in this paper we present some preliminary evidence on scope economies using a large sample of mfis

the role of fixed costs and cost complementarities in determining scope economies and the cost of narrow banking proposals narrow banking proposals would separate insured deposits from most types of bank lending using data from large u s banks the authors examine the extent to which narrow banking proposals are likely to result in increased production costs production costs will rise for nonjoint provision of deposit and loan services if there are cost complementarities in producing the two outputs jointly or if joint production enables banks to spread their fixed costs more effectively unlike standard cost function approaches the authors methods allow them to estimate the fixed cost and cost complementarity effects separately they find the net production cost consequences of narrow banking to be negligible copyright 1993 by university of chicago press

cost structure and productivity growth of the taiwanese international tourist hotels abstract this study investigates the cost structure and economic implications of the taiwanese international tourist hotel industry a multi product translog cost function with three inputs and three outputs is estimated using seemingly unrelated regression estimation and three stage least squares a balanced panel dataset consisting of 47 international tourist hotels in taiwan over the period 1997 2001 was obtained from taiwanese tourism bureau and used to estimate the cost function the results show that both scale and scope economies exist in the taiwanese international tourist hotel industry in addition productivity growth is positive over the study period managerial and policy implications for the taiwanese international tourist hotel industry are also discussed

the appropriateness of the poolability assumption for multiproduct technologies evidence from the english water and sewerage utilities abstract the empirical literature on the cost structure of multiproduct firms e g public utilities providing in combination gas water and electricity traditionally assumes a common technology across different products and stages of production letting the issue of poolability unexplored the appropriateness of this assumption is tested here by estimating a general cost function for samples of uk specialized and sewerage diversified water utilities the results show the existence of both aggregate scale economies and diseconomies of scope more interestingly the hypothesis that the two groups of water companies share the same technological parameters is rejected given the implications of this finding in terms of optimal industry configuration and possible restructuring policies e g mergers and or divestitures our test suggests caution in pooling samples when undertaking empirical studies on data which refer to multiproduct technologies

divestiture of nippon telegraph and telephone this article discusses whether the japanese government should break up ntt nippon telegraph telephone in 1995 as the u s federal government compelled at t american telephone telegram to break itself into toll and local telephone companies in 1984 the divestiture of ntt has long been a major industrial policy issue in japan since the common carrier was privatized in 1985 the governmental decision to divest it may influence not only the japanese telecommunications infrastructure but also the global telecommunications and information industries in the world where many common carriers are now facing an environmental change from regulation to competition a unique feature of this study is that it employs eight different estimation techniques to obtain a cost function of ntt so that this research avoids a methodological bias occurring in many empirical studies this study confirms that ntt has maintained cost subadditivity but it has failed to establish the status of a natural monopoly in the observed time period however it also finds that the ntt divestiture will not produce a price reducing benefit to japanese telecommunications consumers this research result will serve as empirical evidence for guiding the governmental review of this large scale industrial policy issue in japan

potential cost synergies from banks acquiring real estate brokerage services abstract national banks and financial holding companies fhc solicited permission from the federal reserve board and the treasury department to add real estate brokerage and management services to list of permissible business activities under the 1999 gramm leach bliley act glb to date permission has been denied due to the community choice in real estate act hr 111 and s 98 this study offers a method of combining the financial data of two independent industries additionally this study identifies the scale returns and cost complementarities that may occur if banks offered real estate brokerage services under a single organization considerable evidence suggests that joining bank and real estate activities under a single organization would continue to generate increasing returns to scale for banks even when large levels of real estate brokerage services are offered by the joint institution in addition the results indicate evidence that bank acquisitions of real estate brokerages do create some cost saving synergies from cost complementarities between product lines finally complementarities exist between traditional bank services and real estate services most at low levels of real estate outputs

analysis of hospital production an output index approach in this study a new model of hospital costs is developed and estimated utilizing an output index this theoretically appropriate output index is constructed to accurately reflect the differentiated nature of hospital care by employing both patient and diagnosis characteristics in its construction using this output index we estimate a long run translog cost function with a dataset of 321 california hospitals for the year 2003 we find evidence of economies of scope across specialties within primary care and evidence of scope diseconomies within secondary and tertiary care point estimates of scale economies using the output index indicate that minimum efficient scale is reached at a larger level than when using less refined output measurement techniques that have often been used in similar studies our estimates indicate the importance of accounting for specialty specific scope economies when analyzing the production properties of firms producing differentiated products

scale and scope efficiencies through hospital consolidations the hospital sector in the province of ontario has recently completed a large scale restructuring marked by wide ranging hospital closures mergers and program transfers given a generally inconclusive economics literature regulators used an accounting as opposed to an economic approach when predicting gains to consolidations this paper uses an economic cost function to examine economies of scale and scope in the years preceding restructuring where there was little doubt that economies were possible issues relating to output aggregation functional form and scale and scope testing are addressed and an equilibrium cost function is derived from an estimated short run function to measure the cost concepts of interest using index and direct approaches we examine a variety of potential reconfigurations and conclude that there were indeed large scale unexploited gains to strategic consolidation in the hospital sector furthermore these gains may not have been detected using standard approaches in the literature

do consumers pay for one stop banking evidence from an alternative revenue function abstract in providing financial services jointly banks may reduce costs due to complementarities in production cost economies of scope or raise revenues from complementarities in consumption revenue economies of scope cost economies of scope between bank deposits and loans have been found to be small revenue economies of scope are investigated here for the first time and found to be insignificant over 1978 1990 for both small and large banks and for those on or off the revenue efficient frontier the lack of complementarities between deposits and loans where benefits are most likely to occur suggests that claims of important synergies from an expansion of banking powers be taken with caution

structural reform of japanese electric power industry separation between generation and transmission distribution this study examines the cost structure of japanese electric power industry to investigate whether a structural reform on the industry really enhances a cost saving benefit to consumers a composite cost function model using a panel data set is used for this study the data set consists of nine electric power companies from 1990 to 2008 based upon the estimation results this study examines whether economies of scale and vertical economies exist in the industry then this study conducts a cost subadditivity test that is a necessary condition of natural monopoly the empirical results indicate that the electric power firms exhibit the status of economies of scale in their transmissions and distributions and the operation as a whole however they do not exhibit economies of scale in their generations thus the transmission operation by integration in a large area can improve its economic efficiency furthermore the industry should introduce more competition in both generation and wholesale power markets where more firms can participate in their power trades this study also empirically confirms that vertical economies have existed in the industry moreover this study confirms that all the estimates in the cost subadditivity test satisfy the necessary condition of natural monopoly where each estimate indicates cost saving in cost subadditivity the test does not guarantee a sufficient condition of natural monopoly however it clearly indicates that the functional separation between generation and transmission will increase total production cost in the industry the complete separation may result in a net loss of economic efficiency if a competition benefit does not exceed an expected economic loss consequently this study suggests that the industrial structure of future japanese electric power industry should be evaluated from not only an expected benefit by introducing competition but also an unbundling cost that occurs with a loss of vertical integration

a composite cost function for multiproduct firms with an application to economies of scope in banking the composite cost function the authors propose combines a quadratic output structure with a log quadratic input price structure and is well suited for examining economies of scope subadditivity and other important properties of multiproduct firms to compare the composite model with an appropriate set of alternative functional forms they develop a parsimonious but general specification that nests the standard translog cost function the generalized translog cost function a separable quadratic cost function and the composite cost function an application to economies of scope in banking confirms the advantages of the composite model copyright 1992 by mit press

privatising multi product banks in october 1983 following a stock market crash the israeli government became the owner of most of the banking system in the country the government is now getting ready to privatize the banks using a simple model of imperfect competition between multiproduct banks the paper evaluates two proposals which have been raised in this context spinning off entire divisions versus splitting the banks into smaller banks the degree of substitutability between banking products e g short and long term credit plays a key role in the analysis implications for banking reform in other countries are briefly discussed copyright 1995 by royal economic society

nonparametric efficiency estimation in stochastic environments this paper develops a new nonparametric model for efficiency estimation in contrast to data envelopment analysis dea it does not impose debatable production assumptions like free disposability and convexity and it does not assume that the data are measured without error the estimators are asymptotically unbiased and have an asymptotic variance that is comparable to that of stochastic frontier estimators provided the latter use a correct specification of the functional form for the production relationships in addition the estimators can be computed using a simple enumeration algorithm

implications of breach remedy and renegotiation design for innovation and capacity amanufacturer writes supply contracts with n buyers then the buyers invest in innovation and the manufacturer builds capacity finally demand is realized and the firms renegotiate the supply contracts to achieve an efficient allocation of capacity among the buyers the court remedy for breach of contract specific performance versus expectation damages affects how the firms share the gain from renegotiation and hence how the firms make investments ex ante the firms may also engage in renegotiation design inserting simple clauses into the supply contract to shape the outcome of renegotiation for example when a buyer grants a financial hostage to the manufacturer or is charged a per diem penalty for delay in bargaining the manufacturer captures the gain from renegotiation tradable options which grant buyers the right to trade capacity without intervention from the manufacturer return the gain from renegotiation to the buyers this paper proves that under surprisingly general conditions the firms can coordinate their investments with the simplest of supply contracts fixed quantity contracts this may require renegotiation design and certainly requires that the firms understand the breach remedy and set their contract parameters accordingly

a natural monopoly in natural gas transmission abstract in this article we test for subadditivity in the cost structure associated with transporting natural gas by trans canada pipelines ltd and measure for possible cost savings from increased competition that could be realized by removing the monopoly status granted by the national energy board in measuring subadditivity we apply both the baumol et al contestable markets and the theory of industry structure 1982 and the evans and heckman am econ rev 764 1984 613 procedures our results show evidence of subadditivity in the cost structure and consequently the possible benefits from increased competition resulting from splitting up the monopoly could be offset by the sacrifice of scale efficiencies

efficiency and technical progress in banking empirical results for a panel of german cooperative banks abstract using 1989 1992 individual data of 757 german cooperative banks and applying the intermediation approach we specify a multi product translog cost function for this part of the german banking industry for all size classes moderate economies of scale can be identified there is also evidence of economies of scope which supports the notion of universal banking as for cost efficiency we find that the average banks in all size classes deviate considerably from the best practice cost frontier all banks enjoy growth of total factor productivity which is higher for the smaller banks in the sample

poder de mercado intermediacion financiera y banca un enfoque de organizacion industrial this article provides an exploratory analysis of the process for determining intermediation margins in the peruvian banking system in the period between 2001 and 2010 this process was influenced primarily by two occurrences the international financial crises towards the end of the 1990s and the application of the financial system consolidation program programa de consolidacion del sistema financiero in peru the analysis delivers some evidence that in the case of peruvian banking market power and specifically the existence of market power related inequalities between banks may be relevant factors in the process of determining financial intermediation margins

cost structure and capacity in the norwegian pelagic fisheries the parameters of the short run cost function are estimated for three vessel types taking part in the norwegian pelagic fisheries purse seine vessels trawlers and coastal vessels the generalized translog functional form is used estimates of returns to scale are calculated and the results indicate that there are substantial economies of scale in all vessel classes it is further investigated whether excess capacity varies with vessel size and age the analysis suggests increased quotas per vessel to avoid rent dissipation with the total allowable catch given the number of participating vessels must be reduced

scale economies scope economies and technical change in federal reserve payment processing in the past decade the u s economy has witnessed a tremendous surge in the usage of electronic payment processing services and an increased importance of the firms that provide these services in this paper we estimate scale economies scope economies and technical change in the federal reserve s provision of payments processing from 1990 to 2000 we find considerable scale economies and evidence of some scope economies for the provision of automated clearinghouse fedwire and book entry services no matter whether we specify a separable quadratic or a translog cost function in addition we find that disembodied technical change also contributed to the overall reduction in costs throughout the 1990s

choosing among alternative cost function specifications an application to italian multi utilities abstract the paper investigates the cost properties of a sample of italian utilities providing in combination gas water and electricity services the estimates from a multi product composite cost function rev econ stat 74 1992 221 are compared with the ones coming from other traditional functional forms such as the standard translog st the generalized translog gt and the separable quadratic sq the results show that the composite model provides a better description of data and highlight the presence of global scope and scale economies for the median firm of the sample