Cost efficiency, economies of scale and economies of scope in the British retail banking sector

In this paper the efficiency characteristics of the British retail banking \nsector are investigated. Distribution free cost efficiency, economies of \nscale and economies of scope are all measured. The study employs a one \nway fixed effects model with a translog specification of productive \ntechnology. Both ‘production’ and ‘intermediation’ models of bank \nproduction are employed and contrasted. A substantial distribution of cost \nefficiency is observed in this most important commercial sector. Overall, \nslight dis-economies of scale are reported for the ‘intermediation’ \napproach and substantial diseconomies of scale are recorded for the \n‘production’ approach. A substantial dispersion of cost efficiency is \nobserved for this sector with both model specifications.