Efficiency, Productivity, and Scale Economies in the U.S. Property-Liability Insurance Industry

J. David Cummins and Xiaoying Xie
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J. David Cummins: Temple University
Xiaoying Xie: CA State University

Working Papers from University of Pennsylvania, Wharton School, Weiss Center

Abstract: The paper examines efficiency, productivity and scale economies in the U.S. property-liability insurance industry. Productivity change is analyzed using Malmquist indices, and efficiency is estimated using data envelopment analysis (DEA). The results indicate that the majority of firms below median size in the industry are operating with increasing returns to scale, and the majority of firms above median size are operating with decreasing returns to scale. However, a significant number of firms in each size decile have achieved constant returns to scale. Over the sample period, the industry experienced significant gains in total factor productivity, and there is an upward trend in scale and allocative efficiency. More diversified firms, stock insurers, and insurance groups were more likely to achieve efficiency and productivity gains. Higher technology investment is positively related to efficiency and productivity improvements.

JEL-codes: D24 G22 (search for similar items in EconPapers)
Date: 2010-12
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Persistent link: https://EconPapers.repec.org/RePEc:ecl:upafin:11-08

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