Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/59493 
Year of Publication: 
2011
Series/Report no.: 
Working Paper No. 2011-27
Publisher: 
Rutgers University, Department of Economics, New Brunswick, NJ
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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