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How Stable is the Multiproduet Translog Cost Function? Evidence from the Dutch Banking Industry

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Swank, J. How Stable is the Multiproduet Translog Cost Function? Evidence from the Dutch Banking Industry. Credit and Capital Markets – Kredit und Kapital, 29(1), 153-172. https://doi.org/10.3790/ccm.29.1.153
Swank, Job "How Stable is the Multiproduet Translog Cost Function? Evidence from the Dutch Banking Industry" Credit and Capital Markets – Kredit und Kapital 29.1, 1996, 153-172. https://doi.org/10.3790/ccm.29.1.153
Swank, Job (1996): How Stable is the Multiproduet Translog Cost Function? Evidence from the Dutch Banking Industry, in: Credit and Capital Markets – Kredit und Kapital, vol. 29, iss. 1, 153-172, [online] https://doi.org/10.3790/ccm.29.1.153

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How Stable is the Multiproduet Translog Cost Function? Evidence from the Dutch Banking Industry

Swank, Job

Credit and Capital Markets – Kredit und Kapital, Vol. 29 (1996), Iss. 1 : pp. 153–172

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Job Swank, Amsterdam

References

  1. Baumol, W. J.: “On the Proper Cost Tests for Natural Monopoly in a Multiproduct Industry.” The American Economic Review 67, December 1977, 809-22.  Google Scholar
  2. Benston, G. J.: “Economies of Scale of Financial Institutions.” Journal of Money, Credit and Banking 4, May 1972, 312 -41.  Google Scholar
  3. Benston, G. J., Hanweck G. A. and Humphrey D. B.: “Scale Economies in Banking: A Restructuring and Reassessment.” Journal of Money, Credit and Banking 14, November 1982, 435 -56.  Google Scholar

Abstract

This paper presents evidence on the stability of the multiproduct translog cost function from a sample of Dutch banks. It is concluded that a hybrid form of this function is unable to capture the production structures of banks on edges of the cost surface. It is advisable, therefore, to exclude highly specialized banks and unit-branch banks from the sample. Unlike most other bank cost studies, the average cost curve is found to be L-shaped rather than U-shaped. Significant scope diseconomies between loans and savings accounts suggest that there is no natural monopoly in the Dutch banking sector.