Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/59493
Authors: 
Hughes, Joseph J.
Mester, Loretta
Year of Publication: 
2011
Series/Report no.: 
Working Papers, Department of Economics, Rutgers, the State University of New Jersey 2011,27
Abstract: 
Earlier studies found little evidence of scale economies at large banks; later studies using data from the 1990s uncovered such evidence, providing a rationale for very large banks seen worldwide. Using more recent data, we estimate scale economies using two production models. The standard risk-neutral model finds little evidence of scale economies. The model using more general risk preferences and endogenous risk-taking finds large scale economies. We show that these economies are not driven by too-big-to-fail considerations. We evaluate the cost implications of breaking up the largest banks into banks of smaller size.
JEL: 
D21
D20
Document Type: 
Working Paper

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