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- Title
Are There Economies of Scope in U.S. Commercial Banking?
- Authors
Chang, C. Edward; Lynge Jr., Morgan J.
- Abstract
The purpose of this study is to examine the existence of economies of scope in the production of currently permissible banking services. This study is distinguished from previous studies by a number of features. First, we use an improved flexible functional form. The computation of the measures of economies of scope requires the assumption of a zero level of output for at least one of the products being purchased. However, the translog cost function always yields zero total costs whenever the output of even one output is zero. Since the translog cost function used in many previous studies cannot accommodate zero output levels, banks offering some but not all products were always eliminated. Previous studies employing the translog form either have not calculated economies of scope or have arbitrarily calculated economies of scope by inserting a small value of the relevant output in place of a zero output level.
- Publication
American Business Review, 1993, Vol 11, Issue 2, p61
- ISSN
0743-2348
- Publication type
Academic Journal