Scope and scale economies in Federal Reserve payment processing
In the past decade, the U.S. economy has witnessed a tremendous surge in the usage of electronic payment processing services and an increased importance of the firms that provide these services. The payments industry has also undergone changes in cost structure with the introduction of new technology. Unfortunately, data on the private provision of payment processing services are not available. However, the Federal Reserve provides similar services and collects data on its own provision of payments processing, offering an opportunity to gain insights into the cost structure of payments processing. In this paper, we estimate the scope and scale economies and the technical change in the Federal Reserve's provision of payments processing from 1990-2000. We find considerable scale economies and evidence of some scope economies for the provision of automated clearinghouse, fedwire, and book-entry services no matter whether we specify a separable quadratic or a translog cost function. In addition, we find that disembodied technical change also attributed to the overall reduction in costs through the 1990s.
|Date of creation:||2002|
|Contact details of provider:|| Postal: 1455 East 6th St., Cleveland OH 44114|
Web page: http://www.clevelandfed.org/
More information through EDIRC
|Order Information:|| Email: |
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Berger, Allen N. & Hanweck, Gerald A. & Humphrey, David B., 1987.
"Competitive viability in banking : Scale, scope, and product mix economies,"
Journal of Monetary Economics,
Elsevier, vol. 20(3), pages 501-520, December.
- Allen N. Berger & Gerald A. Hanweck & David B. Humphrey, 1986. "Competitive viability in banking: scale, scope, and product mix economies," Research Papers in Banking and Financial Economics 82, Board of Governors of the Federal Reserve System (U.S.).
- Heckman, James J. & Singer, Burton, 1985.
Journal of Econometrics,
Elsevier, vol. 27(1), pages 137-138, January.
- Evans, David S & Heckman, James J, 1986. "A Test for Subadditivity of the Cost Function with an Application to the Bell System: Erratum," American Economic Review, American Economic Association, vol. 76(4), pages 856-858, September.
- McAllister, Patrick H. & McManus, Douglas, 1993. "Resolving the scale efficiency puzzle in banking," Journal of Banking & Finance, Elsevier, vol. 17(2-3), pages 389-405, April.
- Paul W. Bauer & Diana Hancock, 1995. "Scale economies and technological change in Federal Reserve ACH payment processing," Economic Review, Federal Reserve Bank of Cleveland, issue Q III, pages 14-29.
- Hancock, Diana & Humphrey, David B. & Wilcox, James A., 1999. "Cost reductions in electronic payments: The roles of consolidation, economies of scale, and technical change," Journal of Banking & Finance, Elsevier, vol. 23(2-4), pages 391-421, February.
- Paul W. Bauer & Gary D. Ferrier, 1996.
"Scale economies, cost efficiencies, and technological change in Federal Reserve payments processing,"
Board of Governors of the Federal Reserve System (U.S.), pages 1004-1044.
- Bauer, Paul W & Ferrier, Gary D, 1996. "Scale Economies, Cost Efficiencies, and Technological Change in Federal Reserve Payments Processing," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 28(4), pages 1004-39, November.
- Wheelock, David C. & Wilson, Paul W., 2001.
"New evidence on returns to scale and product mix among U.S. commercial banks,"
Journal of Monetary Economics,
Elsevier, vol. 47(3), pages 653-674, June.
- David C. Wheelock & Paul W. Wilson, 1997. "New evidence on returns to scale and product mix among U.S. commercial banks," Working Papers 1997-003, Federal Reserve Bank of St. Louis.
- Evans, David S & Heckman, James J, 1984. "A Test for Subadditivity of the Cost Function with an Application to the Bell System," American Economic Review, American Economic Association, vol. 74(4), pages 615-623, September.
- Scott E. Knudson & Jack K. Walton & Florence M. Young, 1994. "Business-to-business payments and the role of financial electronic data interchange," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Apr, pages 269-278.
- Kirstin E. Wells, 1996. "Are checks overused?," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall, pages 2-12.
When requesting a correction, please mention this item's handle: RePEc:fip:fedcwp:0213. 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: (4D Library)
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.