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Impact of trade area environment on bank's comparative advantages

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  • Aude Hubrecht-Deville
  • Herve Leleu

Abstract

This 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 Info

Article provided by Taylor & Francis Journals in its journal Applied Economics.

Volume (Year): 40 (2008)
Issue (Month): 17 ()
Pages: 2209-2219

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Handle: RePEc:taf:applec:v:40:y:2008:i:17:p:2209-2219

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  1. Colwell, R J & Davis, E P, 1992. " Output and Productivity in Banking," Scandinavian Journal of Economics, Wiley Blackwell, vol. 94(0), pages S111-29, Supplemen.
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  7. Allen N. Berger & John H. Leusner & John Mingo, 1994. "The efficiency of bank branches," Finance and Economics Discussion Series 94-26, Board of Governors of the Federal Reserve System (U.S.).
  8. Francisco Pérez García & Javier Quesada Ibañez & José Manuel Pastor Monsálvez, 1995. "Efficiency Analysis In Banking Firms: An International Comparison," Working Papers. Serie EC 1995-18, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  9. Parkan, Celik, 1987. "Measuring the efficiency of service operations: An application to bank branches," Engineering Costs and Production Economics, Elsevier, vol. 12(1-4), pages 237-242, July.
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Cited by:
  1. Damien Bo & Aude Deville & Philippe Luu, 2013. "Evaluation de la performance des villes françaises," Post-Print hal-01002928, HAL.

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