Narrow Results

Purpose: The key objectives of the study are to investigate whether increased bank size is essential for banking efficiency in Pakistan, further, to explore the influence of market power or economies of scale on size–efficiency relationship. Design/Methodology/Approach: The dynamic two-step system GMM approach is applied on bank-level data of a panel set of 31 commercial banks of Pakistan, over the period 2006 to 2022. For robustness, the selected period is further divided into three time spans, 2006–2010, 2011–2019, and 2019–2022, and to explore size-efficiency association among different size categories, the entire data is divided into two groups. Findings: The study reveals two key outcomes. First, size is a c ore variable in describing efficiency movement in Pakistan as a significant positive relationship is evinced between bank size and net interest margin in both groups even in the period of COVID-19. Second, both market power and economies of scale strongly influence size–efficiency relationship. However, the impact of these variables is insignificant for medium and small banks. Further, all bank-specific and macroeconomic variables are significantly allied with banking efficiency. Originality: The study is premiered to examine the bank size–efficiency relationship in the light of market power and economies of scale for the banking sector of Pakistan. The originality of this research is the deep examination of bank size–efficiency relationship with two effectual macroeconomic variables. Research Implications: The core policy implication is that size is a fundamental factor while market power and economies of scale are driving forces of size–efficiency association in Pakistan.

This paper analyzed how South Korea’s intra-industry trade (IIT) with her major trading countries (i.e., China, the USA, and Japan (CUJ)) in the manufacturing sector changed over time for the period of 1994–2011. It was found that South Korea’s IIT with China mainly increased through economies of scale (ES), the ratio of inward and outward foreign direct investment to total investment (FDI), the ratio of intermediate cost to total cost (II), and R&D intensity (RD). On the other hand, South Korea’s IIT with the USA was found to mainly increase through ES, FDI, and RD. Finally, RD, FDI, and II variables are found to be the most important determinants for South Korea’s IIT with Japan.

This paper empirically considers economies of scale that firms must reach to be considered viable ongoing entities. These are estimated from the selling prices of actual firms in two broad industries — service and manufacturing. For service firms, the minimum size is $10 million in annual revenues and for manufacturing firms, it is smaller at $6 million in sales to reach economies of scale.

Traditional economic theory considers firms becoming more efficient with increasing size until they reach an optimal economy of scale. Until they reach that size, we show that they cannot be considered truly ongoing firms and cannot be valued directly as the present value of future earnings. When firms are also independent of their owner/manager, we consider that a viable ongoing entity exists.

This paper studies the learning-by-exporting effect through which a firm increases its productivity by entering into the export market. Using Chinese firm-level data, we show that economies of scale and the choice of production technology play an important role in bridging the gap between exporting and firm performance. By stratifying samples and considering causality, we find that the learning-by-exporting effect is more likely to occur for firms that produce large amounts of outputs to exploit scale economies and, at the same time, are highly capital intensive, so that they can absorb new knowledge and information, which are basically embodied in capital goods, from world markets.

Concern about sustained availability of fresh groundwater for agricultural use in the Mississippi Alluvial Plain (MAP) mounts as groundwater levels decline. We evaluate the elasticities of demand for groundwater and other agricultural inputs, as well as the overall and output-specific economies of scale for four major irrigated commodities (rice, corn, soybeans, and cotton) in the MAP region. Additionally, we investigate the impacts of two groundwater management policy scenarios, including increasing pumping cost and groundwater use restrictions, on irrigation behavior. The results show price elasticity of demand for groundwater to be $-0.13$, indicating that it is inelastic, and an increased cost of pumping will not significantly decrease the relative demand for groundwater in the region. Even with policy scenarios that either increase the costs of pumping significantly or restrict groundwater use in the region, groundwater demand still appears to be inelastic. We also document significant overall economies of scale in the region. Our findings have implications for potential policy options aimed at reducing groundwater use. Efficient management practices are important to increase aquifer recharge, and considering human behavior via economic analysis will improve projections of groundwater availability in the MAP region.

We show how economies of scale may be distinguished from technical progress and how both may be simultaneously identified in the empirical analysis of aggregate economic growth. Using the meta-production function framework and a cross-section of time-series macroeconomic data on inputs and outputs from a sample of developed, newly industrialised and developing economies, estimates of their individual degrees of returns to scale and rates of technical progress over different periods are obtained. It is not necessary to assume that the aggregate production functions of all economies are identical — they only need to be similar after suitable economy- and commodity-specific time-varying transformations of the quantities of the measured inputs and outputs, and these similarity assumptions can be and are explicitly tested. In addition, the individual economy-specific biases of returns to scale and technical progress, if any, are also identified. It is found that the degree of returns to scale of an individual economy depends on the size of its domestic market, represented by the size of its population, and the share of industry value-added in its GDP. It is also found that the rates of technical progress of individual East Asian economies depend on their tangible capital intensities.

In the current context, electronic commerce has transformed the retail market throughout India and the world. Initially in India, e-commerce firms took some time to get accepted and recognized by the Indian consumers due to lack of internet services, confidence and trust in e-payments. But with the increase in internet users today, every business has moved to an online platform and this has aided many manufacturers and consumers. But many of these e-commerce firms have failed to withstand the competition due to the high cost of running the business. The ones who followed the concept of economies of scale (EOS) for their business survived better in the market. The concept of economies of scale is a cost advantage gathered by the companies due to expansion in scale of operations; e-commerce has accomplished economies of scale with the increase in number of orders from customers, which in turn has lowered the cost price per unit of the product and has increased the profitability of the manufacturers. This study focuses specifically on how EOS has helped firms increase their market share, assisted medium and small-scale manufacturers to cope up in a cost-competitive business environment, and how technological advancement within these e-commerce firms helped in scaling up their operations. The study will also elaborate on the conditions when economies of scales become the diseconomies of scales.