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Cost efficiency and scale economies in the Turkish insurance industry

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This article examines the cost efficiency and scale economies of insurance firms in the Turkish insurance industry over a 15-year period, 1990-2004. Using the stochastic cost frontier model, cost efficiency scores and scale economies were estimated for each firm in the sample. The results show that mean cost inefficiencies range between 18.3 and 36.9% of total costs and they do not tend to decrease over time. On average, small firms are more cost efficient than large firms. Economies of scale appear present and significant for any class size. The results suggest that there is a substantial difference in scale economies between small and large insurance firms.

Document Type: Research Article


Affiliations: Department of Economics, Faculty of Business, Dokuz Eylul University, 35160 Buca Izmir, Turkey

Publication date: November 1, 2009

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