New evidence on returns to scale and product mix among US commercial banks

This paper presents new estimates of scale and product mix economies for U. S. commercial banks. We compare estimates derived from fitting a translog f unction to bank costs with estimates derived from nonparametric methods. We refine measures of scale and product mix economies introduced by Berger et al. (J. Monet. Econ. 20 (1987) 501) to accommodate nonparametric estimatio n, and estimate confidence intervals to assess the statistical significance of returns to scale. Broadly, we find evidence that potential economies ha ve increased since 1985, with scale economies not exhausted until banks hav e $30-$500 million of assets. We generally fail to reject constant returns for larger banks. (C) 2001 Elsevier Science B.V. All rights reserved.