Impact of trade area environment on bank's comparative advantages

Aude Hubrecht (1) , Herve Leleu (2, 3, 4)

1 LEG - Laboratoire d'Economie et de Gestion
2 UCL FGES - Université Catholique de Lille - Faculté de gestion, économie et sciences
3 UMR CNRS 8179
4 LEM - Lille économie management - UMR 9221

This paper analyzes the relationship between the comparative advantages of bank branches and the trade area environment. Bank branches are points of sale whose trade environment influences their activities and performance. Comparative advantages are defined, for each output mix, by the strict dominance of a production technology in a specific trade area over the production technologies of other environments. Using Shephard's output distance functions on a sample of 728 bank branches, we compare the production technologies for different output mixes and different trade environments. We show that none of the production technologies strictly dominates the others and none of them is strictly dominated. Therefore, each trade area benefits from comparative advantages that we try to highlight. Finally, we evaluate the performance of the central banks regarding their ability to provide the right incentives on output mixes to their bank branches so that the latter may benefit from their comparative advantages.

Mots clés: banks branches; international trade; performance

Domaines: Sciences de l'Homme et Société; Gestion et management

Aude Hubrecht, Herve Leleu. Impact of trade area environment on bank's comparative advantages. Applied Economics, 2008, 40 (17), pp.2209-2219. ⟨10.1080/00036840600949389⟩. ⟨hal-00582075⟩