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Estimating scale economies in financial intermediation: a doubly indirect inference

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  • Mokhtar Kouki
  • Sang Park
  • Eric Renault

Abstract

This paper provides a vertically integrated modelling of the financial production process. In a first stage the activity of commercial banks or insurance companies embodies some technical and commercial aspects such as services to depositors or mutualization of risk through distribution of contracts of insurance. In the second stage banks are involved in the intermediation activity. By using a simulation and the doubly indirect inference method for the estimation we were able to resolve two main econometric problems: decomposition of aggregated data over two vertically integrated stages of production and inconsistency of the estimators due to endogeneity and misspecification. An application to French Banking industry is provided. Copyright Springer Science+Business Media New York 2014

Suggested Citation

  • Mokhtar Kouki & Sang Park & Eric Renault, 2014. "Estimating scale economies in financial intermediation: a doubly indirect inference," Journal of Productivity Analysis, Springer, vol. 41(3), pages 351-365, June.
    • Handle: RePEc:kap:jproda:v:41:y:2014:i:3:p:351-365
    DOI: 10.1007/s11123-013-0345-z
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    Cited by:

    1. Gonzalo Escobar Elexpuru & Ivan Valdes De la Fuente, 2021. "Economies of Scale in the Payment Card Market in Chile," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(2), pages 67-81.

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    More about this item

    Keywords

    Doubly indirect inference estimation; Economies of scale; Vertical integration; Financial intermediation; C29; C58; D22; D24;
    All these keywords.

    JEL classification:

    • C29 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Other
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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