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A Multiproduct Cost Study of Savings and Loans
Author(s) -
MESTER LORETTA J.
Publication year - 1987
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/j.1540-6261.1987.tb02575.x
Subject(s) - subadditivity , economies of scale , econometrics , scope (computer science) , economics , economies of scope , function (biology) , product (mathematics) , scale (ratio) , mathematics , microeconomics , computer science , geography , geometry , discrete mathematics , evolutionary biology , programming language , biology , cartography
This paper investigates the cost structure of savings and loans. Most studies of financial institutions have failed to take into account the multiproduct nature of these institutions. Using the multiproduct approach, the existence of subadditivity, multiproduct global and product‐specific economies of scale and scope, and substitutability between inputs is investigated. A translogarithmic cost function is estimated using 1982 data on California savings and loans. Restrictive functional forms also estimated are rejected. Standard errors for the statistics calculated are estimated, and various statistical tests are conducted. Previous authors have not calculated standard errors for these statistics. No evidence of subadditivity in the industry is found.