Impact of trade area environment on bank's comparative advantages
AbstractThis article analyses the relationship between the comparative advantages of bank branches and the trade area environment. Bank branches are points of sale whose trade environment influences their activities and performance. Comparative advantages are defined, for each output mix, by the strict dominance of a production technology in a specific trade area over the production technologies of other environments. Using Shephard's output distance functions on a sample of 728 bank branches, we compare the production technologies for different output mixes and different trade environments. We show that none of the production technologies strictly dominates the others and none of them is strictly dominated. Therefore, each trade area benefits from comparative advantages that we try to highlight. Finally, we evaluate the performance of the central banks regarding their ability to provide the right incentives on output mixes to their bank branches so that the latter may benefit from their comparative advantages.
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Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal Applied Economics.
Volume (Year): 40 (2008)
Issue (Month): 17 ()
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Other versions of this item:
- Aude Hubrecht & Hervé Leleu, 2004. "Impact of Trade Area Environment on Bank’s Comparative Advantages," Working Papers FARGO 1041201, Université de Bourgogne - Crego EA 7317/Fargo (Research center in Finance,organizational ARchitecture and GOvernance).
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
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