Acknowledgements

Economies of Scale Versus Participation: a Co-operative Dilemma?

Jones, D.C.; Kalmi, P.

57

JEOD - Vol.1, Issue 1 (2012)

Year

Authors

Type of 

Cooperative

Data

Issues, 

Hypothesis(es)

Method

Findings & Comments

2008

Joshi and 

Smith 

Cooperative 

leagues of 

Mondragon, 

Lega

Convenience 

sample;

What are the 

strategic incentives 

of individual firms 

to form coops, & for 

coops to organize 

into a league?

Game theory used 

to model league 

& coop formation, 

cost structures

Economies of scale for R&D, marketing, and 

finance  

Models the scenario in which only a coop 

league should operate, and yet firms decide 

to form a league despite higher marginal 

costs than cooperative counterparts 

2005

Wilcox 

U.S. Credit 

Unions

Random 

sample;

Annual data on 

credit unions 

from 1980 to 

2004

Can depository 

institutions achieve 

economies of scale?

Compare deposit 

& merger trends 

of depository 

institutions vs. 

credit unions in 

the U.S. over time

Find that credit unions typically experience 

economies of scale – larger credit unions 

have lower average costs and higher 

net incomes – attribute this growth to 

deregulation in the U.S. 

Also, most academic work finds that banks do 

not experience economies of scale

2001

Cavallo 

and Rossi

Banks and 

financial 

institutions 

in France, 

Germany, Italy, 

Netherlands, 

Spain, and UK

Random 

sample;

Annual data 

from 6 countries 

for period 1992-

1997; 442 banks 

in unbalanced 

panel data

Are cost 

improvements in 

output efficiency 

likely to emerge 

from the ongoing 

consolidation of 

European banks? 

What implications 

for future market 

structure?

Model cost 

function using 

dual approach 

(consideration 

of both input 

and output 

characteristics of 

deposits)

Results support view that regulatory 

changes & technology progress have raised 

the optimal scale of banks – consolidation 

justified; Also show mergers should be 

oriented to increase bank scale for small 

banks & to expand into new products for 

large banks 

While there are still cost inefficiencies for 

traditional banks (commercial, cooperative, 

S+L), significant economies of scale and 

scope are present for most financial 

institutions

2001

Moyano-

Estrada, 

Entrena, 

and 

Serrano 

del Rosal 

Spanish 

agricultural 

cooperatives

Convenience 

sample

Spanish 

agricultural 

market 

cooperative 

data from 1990-

1999

Analyze federations 

of cooperatives 

from ideal type 

of claim-oriented 

associations (farmers’ 

unions); Effects of 

establishment of 

Spanish Federation 

of Agricultural 

Cooperatives (CCAE)

Theoretical 

analysis; 

discourses, 

strategies, and 

organizational 

models for 

European 

agricultural co-ops

Steady reduction in the number of 

agricultural cooperatives between 1994-

1999 but increased concentration indicates 

likely economies of scale; cooperatives more 

important for social function than economic;

Agricultural cooperatives form territorial 

associations, branch-oriented interests 

subordinated; CCAE cannot be seen as result 

of efficiency factors which reduce transaction 

costs between co-ops

1999

Lang and 

Welzel

German 

cooperative 

banks

Unbalanced 

panel of 

Bavarian 

cooperative 

banks, 1989-97

Are there economies 

of scale for German 

cooperative banks? 

Do post-merger 

cooperative banks 

exhibit greater cost 

efficiencies than 

pre-merger?

Frontier cost 

functions with 

time-variable 

stochastic 

efficiency term 

Find that cooperative bank post-merger does 

not exhibit any additional efficiency; indicates 

economies of scale are not present 

1998

Mehdian 

and 

Rezvanian

US cooperative 

banks

Annual data 

on cooperative 

banks from 

1992-94

Do thrift institutions 

exhibit economies 

of scale and scope? 

What was the 

impact of the FIRREA 

of 1989 on these 

institutions? 

Find evidence of positive economies of scale 

and economies of scope for cooperative 

banks in the US from 1992-94

Also suggest there are a few specific products 

that exhibit economies of scale and scope 

during period studied 

1996

Lang and 

Welzel

German 

cooperative 

banks

Annual data on 

757 German 

cooperative 

banks from 

1989-1992

Are there economies 

of scale for size 

classes of German 

cooperative banks? 

Multi-product 

translog cost 

function 

Find positive, albeit small, economies of scale 

exist for German cooperative banks across all 

size classes

Find evidence of economies of scope

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