EFFICIENCY AND SCALE ECONOMIES IN THE US PROPERTY-LIABILITY INSURANCE INDUSTRY

摘要

The paper examines efficiency and scale economies in the U.S. property-liability insurance industry. Pure technical, scale, cost, and revenue efficiency are estimated over the period 1993-2002 using data envelopment analysis (DEA). Panel data regressions are utilized to explore the relationships between firm characteristics, efficiency, and scale economies. The results indicate that the majority of firms below median size in the industry are operating with increasing returns to scale, and the majority of firms above median size are operating with decreasing returns to scale. However, a significant number of firms in each size decile have achieved constant returns to scale. The regression analysis shows that product mix, distribution system, organizational form, and capitalization are important determinants of insurers’ efficiency. Multinomial logit analysis demonstrates that such characteristics can also help predict a firm’s probability of operating with constant returns to scale.