Cost Improvements, Returns to Scale, and Cost Inefficiencies for Real Estate Investment Trusts
AbstractThis paper extends the existing research on real estate investment trust (REIT) operating efficiencies. We estimate stochastic-frontier, panel-data models specifying a translog cost function. The specified model updates the cost frontier with new information as it becomes available over time. The model can identify frontier cost improvements, returns to scale, and cost inefficiencies over time. The results disagree with most previous research in that we find no evidence of scale economies and some evidence of scale diseconomies. Moreover, we also generally find smaller inefficiencies than those shown by other REIT studies. Contrary to previous research, higher leverage associates with more efficiency.
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Bibliographic InfoPaper provided by University of Connecticut, Department of Economics in its series Working papers with number 2007-05.
Length: 36 pages
Date of creation: Feb 2007
Date of revision:
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Real Estate Investment Trusts; X-efficiency; scale economies;
Find related papers by JEL classification:
- G2 - Financial Economics - - Financial Institutions and Services
- L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
- L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services
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