Handbook of Financial Intermediation and Banking

CHAPTER 5 Optimal Industrial Structure in Banking^*

Loretta J. Mester

Federal Reserve Bank of Philadelphia and the Wharton School, University of Pennsylvania

1. Introduction and Motivation

2. Efficiency Concepts

3. Empirical Implementation

3.1. Bank Production

3.2. Cost Minimization

3.3. Profit Maximization

3.4. More Complicated Objectives

4. Measurement

4.1. Estimation Techniques

4.2. Functional Form, Variable Selection, and Variable Measurement

4.3. Special Issues in Banking

5. Empirical Findings in the Literature

5.1. Scale Economies

5.2. Scope Economies

5.3. X-Efficiency

5.4. Productivity

6. Conclusion

References

1. INTRODUCTION AND MOTIVATION

The banking industry has been undergoing a significant restructuring over the last several ...