Consolidation, Scale Economies and Technological Change in Japanese Banking

Solomon Tadesse

No wp747, William Davidson Institute Working Papers Series from William Davidson Institute at the University of Michigan

Abstract: The paper examines the technological structure of the Japanese banking sector before the onset of the banking crisis and structural reforms of the 90s in order to shade light on the logic of the recent trend to consolidation in the industry. While diseconomies of scale are shown to be pervasive in the large banks, defying the rationale for consolidation, the paper presents evidence of an underlying technological progress that operates to significantly increase the industry’s efficient minimum size, generating economies at larger banks, thus justifying the ongoing trend in consolidation. The results suggest that, to the extent that consumers can benefit from lower costs of bank production, policies that promote a more concentrated banking structure might be consistent with public interest.

Keywords: Scale Economies; Technical Change; Banking (search for similar items in EconPapers)
JEL-codes: D24 G21 O3 (search for similar items in EconPapers)
Pages: pages
Date: 2005-02-01
New Economics Papers: this item is included in nep-com, nep-eff, nep-fin, nep-ino and nep-sea
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Related works:
Journal Article: Consolidation, scale economies and technological change in Japanese banking (2006)
Working Paper: Consolidation, Scale Economics and Technological Change in Japanese Banking (2005)
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