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Measuring Quasi-Economies of Scope in the Property-Liability Insurance Industry

  • Journal of Insurance and Finance
  • 2004, 15(1), pp.29-66
  • Publisher : Korea Insurance Research Institute
  • Research Area : Social Science > Business Management

Hongmin Zi 1

1이화여자대학교

Candidate

ABSTRACT

It is generally believed that there have been some problems in the economies of scope studies in the property-liability insurance industry. This paper tries to overcome those problems by applying new methodology to the measurement of the quasi-economies of scope in the industry. Results imply that in 2000 the US property-liability insurance industry exhibited about 30% of the quasi-economies of scope in costs and that the estimates are statistically significant. We also find similar results in 1994 and 1997. The study also shows that the estimates from the composite cost function are more realistic and stable than those from the Translog cost function. Overall, the results of the paper seemto support, at least in terms of costs, the consolidation activities of property-liability insurers frequently performed during the late of 20th century .

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