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Impact of Trade Area Environment on Bank’s Comparative Advantages

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  • Aude Hubrecht

    () (Université de Bourgogne)

  • Hervé Leleu

    () (Université de Lille)

Abstract

This paper analyzes 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.

Suggested Citation

  • Aude Hubrecht & Hervé Leleu, 2004. "Impact of Trade Area Environment on Bank’s Comparative Advantages," Working Papers CREGO 1041201, Université de Bourgogne - CREGO EA7317 Centre de recherches en gestion des organisations.
  • Handle: RePEc:dij:wpfarg:1041201
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    References listed on IDEAS

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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.

    More about this item

    Keywords

    banks; comparative advantage; production technology; Shephard's output distance; trade area environment Note:;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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