IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this article

Scale and Scope Economies for Direct Writers in the Property-Liability Insurance Industry

Listed author(s):
  • Chong G. Lee
  • Iskander S. Hamwi
  • Farhang Niroomand
Registered author(s):

    This paper investigates the effect of the distribution system employed by direct writers on their cost effectiveness and market share in the property-liability insurance industry. A generalized translog multi-product cost function is estimated in order to test for economies of scale and economies of scope. The regression results indicate that direct writers experience increasing returns to scale as they expand their level of output at the mean. There is also evidence of diseconomies of scope in their auto and all other lines combined (excluding auto and homeowners insurance). A structural test indicated that the generalized translog cost function is a statistically significant improvement over the Cobb-Douglas functional form which has been commonly used by other researchers. Further research is needed to explore the welfare implications of the finding that the production of direct writers may be characterized by increasing returns to scale.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL:
    Download Restriction: no

    Article provided by Western Risk and Insurance Association in its journal Journal of Insurance Issues.

    Volume (Year): 18 (1995)
    Issue (Month): 2 ()
    Pages: 80-97

    in new window

    Handle: RePEc:wri:journl:v:18:y:1995:i:2:p:80-97
    Contact details of provider:

    No references listed on IDEAS
    You can help add them by filling out this form.

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:wri:journl:v:18:y:1995:i:2:p:80-97. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (James Barrese)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.