Abstract
Existing empirical studies in the life insurance industry in the United States and Canada find evidence of economies of scale in at least some aspects of the production of life insurance, with consequent implications for the efficiency of life insurance markets. However, these empirical results are inconsistent with the institutional facts in the industry. First, overall economies of scale (Houston and Simon 1970) are at odds with the evidence that over a substantial period of time, the life insurance market in Canada and the United States has supported a large and growing number of independent firms of vastly different sizes.1 Second, if economies of scale account for the differences in firm size, with small firms ex-
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