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Wages and risk-taking in occupational credit unions: theory and evidence

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  • William R. Emmons
  • Frank A. Schmid

Abstract

Most occupational credit unions serve (in part) as a means for corporate sponsors to deliver tax-favored benefits to their employees. Credit union managers administer this transfer of benefits, but their performance is difficult to measure, particularly in larger credit unions. In this article, William R. Emmons and Frank A. Schmid develop a model of efficiency wages and optimal risk-taking and then provide empirical evidence from a large sample of occupational credit unions. Higher wage expenses are found in larger credit unions. In addition, the authors find a negative relationship between credit union size and risk-taking. They also find that local deposit-market concentration is a significant factor in explaining wage costs and risk-taking in occupational credit unions.

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Bibliographic Info

Article provided by Federal Reserve Bank of St. Louis in its journal Review.

Volume (Year): (1999)
Issue (Month): Mar ()
Pages: 13-32

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Handle: RePEc:fip:fedlrv:y:1999:i:mar:p:13-32:n:2

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Related research

Keywords: Wages ; Credit unions;

References

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  1. Oliver Hart & John Moore, 1998. "Cooperatives vs. Outside Ownership," STICERD - Theoretical Economics Paper Series, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE 346, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
  2. Guinnane, T. & Banerjee, A. & Besley, T., 1993. "Thy Neighbor's Keeper: the Design of a Credit Cooperative with Theory and a Test," Papers, Yale - Economic Growth Center 705, Yale - Economic Growth Center.
  3. Akella, Srinivas R. & Greenbaum, Stuart I., 1988. "Savings and loan ownership structure and expense-preference," Journal of Banking & Finance, Elsevier, Elsevier, vol. 12(3), pages 419-437, September.
  4. Timothy Besley & Stephen Coate & Glenn Loury, 1992. "The Economics of Rotating Savings and Credit Associations," Boston University - Institute for Economic Development, Boston University, Institute for Economic Development 24, Boston University, Institute for Economic Development.
  5. Mester, Loretta J., 1991. "Agency costs among savings and loans," Journal of Financial Intermediation, Elsevier, Elsevier, vol. 1(3), pages 257-278, June.
  6. Fried, Harold O. & Knox Lovell, C. A. & Eeckaut, Philippe Vanden, 1993. "Evaluating the performance of US credit unions," Journal of Banking & Finance, Elsevier, Elsevier, vol. 17(2-3), pages 251-265, April.
  7. Oliver Hart & John Moore, 1998. "Cooperatives vs. outside ownership," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 19360, London School of Economics and Political Science, LSE Library.
  8. Demsetz, Harold, 1983. "The Structure of Ownership and the Theory of the Firm," Journal of Law and Economics, University of Chicago Press, University of Chicago Press, vol. 26(2), pages 375-90, June.
  9. William R. Emmons & Willi Mueller, 1997. "Conflict of interest between borrowers and lenders in credit co- operatives: the case of German co-operative banks," Working Papers, Federal Reserve Bank of St. Louis 1997-009, Federal Reserve Bank of St. Louis.
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Citations

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Cited by:
  1. Leggett, Keith J. & Strand, Robert W., 2002. "Membership growth, multiple membership groups and agency control at credit unions," Review of Financial Economics, Elsevier, Elsevier, vol. 11(1), pages 37-46.
  2. William R. Emmons & Frank A. Schmid, 2000. "Bank competition and concentration: do credit unions matter?," Review, Federal Reserve Bank of St. Louis, Federal Reserve Bank of St. Louis, issue May, pages 29-42.
  3. Emmons, William R. & Schmid, Frank A., 1998. "Credit unions and the common bond," CFS Working Paper Series 1999/01, Center for Financial Studies (CFS).
  4. William R. Emmons & Frank A. Schmid, 2002. "Banks vs. credit unions: dynamic competition in local markets," Supervisory Policy Analysis Working Papers, Federal Reserve Bank of St. Louis 2002-10, Federal Reserve Bank of St. Louis.
  5. Wheelock, David C. & Wilson, Paul W., 2013. "The evolution of cost-productivity and efficiency among US credit unions," Journal of Banking & Finance, Elsevier, Elsevier, vol. 37(1), pages 75-88.
  6. Silvio Goglio & Yiorgos Alexopoulos, 2009. "Financial Deregulation and Economic Distress: Is There a Future for Financial Co-operatives?," Euricse Working Papers, Euricse (European Research Institute on Cooperative and Social Enterprises) 09001, Euricse (European Research Institute on Cooperative and Social Enterprises).
  7. Alexopoulos, Yiorgos & Goglio, Silvio, 2011. "Financial Cooperatives: Problems and Challenges in the Post-Crisis Era," Journal of Rural Cooperation, Hebrew University, Center for Agricultural Economic Research, Hebrew University, Center for Agricultural Economic Research, vol. 39(1).

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