Bank scope economies have been derived from either the standard or generalized (Box-Cox) multiproduct translog (or other logarithmic) functional form. Reported results have ranged from strong economies to diseconomies and are far from conclusive. The problem is functional form. An alternative...

Estimates of bank cost efficiency can be biased if bank heterogeneity is ignored. The author compares X-inefficiency measures derived from a model that constrains the cost frontier to be the same for all banks in the nation and a model that allows the cost functions and error terms to differ...