A Reestimation of the Benston-Bell-Murphy Cost Functions for a Larger Sample with Greater Size and Geographic Dispersion

Abstract

In this paper, the models utilized in earlier studies were applied to a larger sample with greater size and geographic dispersion. For those functions that account for the largest proportions of direct operating cost and employment, the scale coefficients increased from 1965 to 1968 so that they were not significantly different from unity. For activities requiring more skilled human resources than the “factory” operations of the typical bank, there were significant economies of scale of magnitudes similar to those in the 1965 Northeast sample. A test of overall scale economies assuming proportional expansion of all facilities showed a decrease in scale economies since 1965.