Economies of scale and scope in UK building societies: an application of the translog multiproduct cost function

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Abstract
The cost structure and nature of production in UK building societies is analysed. Unlike previous studies this investigation is carried out in a multiproduct framework by estimating a multiproduct translog cost function jointly with the associated input cost share equations. In addition to the calculation of an aggregate measure of economies of scale, this also permits the estimation of product-specific economies of scale as well as overall and product-specific economies of scope. Restrictive functional forms are also tested and rejected, and evidence is provided with respect to possible cost complimentarities between outputs.