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Cost efficiency and scale economies in the Turkish insurance industry

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  • Adnan Kasman
  • Evrim Turgutlu

Abstract

This article examines the cost efficiency and scale economies of insurance firms in the Turkish insurance industry over a 15-year period, 1990-2004. Using the stochastic cost frontier model, cost efficiency scores and scale economies were estimated for each firm in the sample. The results show that mean cost inefficiencies range between 18.3 and 36.9% of total costs and they do not tend to decrease over time. On average, small firms are more cost efficient than large firms. Economies of scale appear present and significant for any class size. The results suggest that there is a substantial difference in scale economies between small and large insurance firms.

Suggested Citation

  • Adnan Kasman & Evrim Turgutlu, 2009. "Cost efficiency and scale economies in the Turkish insurance industry," Applied Economics, Taylor & Francis Journals, vol. 41(24), pages 3151-3159.
  • Handle: RePEc:taf:applec:v:41:y:2009:i:24:p:3151-3159
    DOI: 10.1080/00036840701367663
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    References listed on IDEAS

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    1. Denizer, Cevdet A. & Dinc, Mustafa & Tarimcilar, Murat, 2000. "Measuring banking efficiency in the pre- and post-liberalization environment : evidence from the Turkish banking system," Policy Research Working Paper Series 2476, The World Bank.
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    1. repec:elg:eechap:16878_9 is not listed on IDEAS
    2. repec:taf:jsustf:v:7:y:2017:i:2:p:197-231 is not listed on IDEAS
    3. Jacob A. Bikker, 2017. "Performance of the life insurance industry under pressure: efficiency, competition and consolidation," Chapters,in: Handbook of Competition in Banking and Finance, chapter 9, pages 152-182 Edward Elgar Publishing.
    4. Abul Shamsuddin & Dong Xiang, 2012. "Does bank efficiency matter? Market value relevance of bank efficiency in Australia," Applied Economics, Taylor & Francis Journals, vol. 44(27), pages 3563-3572, September.
    5. Jacob A. Bikker, 2017. "Competition and Scale Economy Effects of the Dutch 2006 Health-Care Insurance Reform," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 42(1), pages 53-78, January.
    6. Jacob Bikker & Adelina Popescu, 2014. "Efficiency and competition in the Dutch non-life insurance industry: Effects of the 2006 health care reform," DNB Working Papers 438, Netherlands Central Bank, Research Department.

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