Economies of Scale and Scope in Kansas Banking

Abstract

This study examines economies of scale and scope in banking using banking data from Kansas immediately before branch banking became legal in the state. Hence this provides an ideal setting for examining economies of scale. Using a translog cost function which allows banks to have more than one output, economics of scale are found in Kansas banks while diseconomies of scale become evident in banks with over $100 million in assets. Moreover, an examination of all Kansas banks tends to suggest there are economies of scope; however, they do not seem to be significant in this setting.