X-efficiency and economies of scale in pension fund administration and investment

Gosse A.G. Alserda, Jacob Bikker () and Fieke (S.G.) van der Lecq

No 17-06, Working Papers from Utrecht School of Economics

Abstract: Pension funds’ operating costs come at the cost of benefits, so it is crucial for pension funds to operate at the lowest cost possible. In practice, we observe substantial differences in costs per member for Dutch pension funds, both across and within size classes. This paper discusses scale inefficiency and X-inefficiency using various approaches and models, based on a unique supervisory data set, which distinguishes between administrative and investment costs. Our estimates show large economies of scale for pension fund administrations, but modest diseconomies of scale for investment activities. We also found that many pension funds have substantial X-inefficiencies for both administrative and investment activities. The two kinds of inefficiency differ across types of pension funds. Therefore, most pension funds should be able to improve their cost performance, and hence increase pension benefits

Keywords: Efficiency; operating costs; cost elasticity; stochastic cost frontier analysis; optimal scale (search for similar items in EconPapers)
Date: 2017-02
New Economics Papers: this item is included in nep-age, nep-eff and nep-eur
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: X-efficiency and economies of scale in pension fund administration and investment (2018)
Working Paper: X-efficiency and economies of scale in pension fund administration and investment (2017)
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