Economies Of Diversification Research Articles

Understanding the aftermath of banks merger: analyzing price effects on public sector banks since the COVID-19 pandemic

PurposeThe current study immerses in the realm of bank mergers among prominent PSBs in India, focusing on the financial performance of six recently merged PSBs entities. Amidst the global impact of the COVID-19 pandemic on economies, the study aims to uncover the efficiency of these PSBs in navigating this unprecedented crisis.Design/methodology/approachThe evaluation encompasses panel data on an annual basis spanning from 2020 to 2023. To assess the overall efficiency of merged PSBs, the advanced statistical technique like one-step system generalized method of moments has been applied to estimate its efficiency.FindingsThe study findings affirm that PSB mergers have bolstered financial metrics and efficiency. Enhanced return on equity (ROA) and net profit margin (NPM) signify improved profitability and efficiency. The consolidation also facilitates better asset management and utilization. Moreover, merged entities benefit from economies of scale, cost efficiencies, risk diversification, technological investments, and overall performance improvements.Practical implicationsThe study's policy suggestions stress ongoing consolidation efforts to boost banking sector resilience, advocating for improved efficiency, governance, and asset quality management. These steps are crucial for successful bank mergers and fostering a robust, competitive banking landscape in India.Originality/valueThis study is a novel attempt to analyze Indian bank profitability and efficiency post PSB mergers amid COVID-19 pandemic. In a developing country like India, especially in PSBs has experienced significant structural changes over the previous 7 years just before pandemic, such a study necessitates a prompt empirical investigation.

The political economy of income diversification and food security in Northern Ghana

The political economy of income diversification and food security in Northern Ghana

Scope economies from rural and urban microfinance services

Microfinance institutions (MFIs) operate in both rural and urban credit markets and provide financial services to the poor not served by commercial banks. MFIs must keep operating costs low to better serve their clients. We evaluate whether MFIs can lower their costs by exploiting economies of diversification from serving both rural and urban markets rather than specializing in only one. We apply a novel method to estimate scope economies that minimizes the well-known “excessive extrapolation” and accommodates MFIs' heterogeneity. Analyzing panel data on MFIs from 105 countries over 2008–2018, we find that about half of loan-only MFIs benefited from diversification and enjoyed scope economies of 16.6% while over two thirds of savings-and-loan MFIs experienced scope diseconomies of 11.7% suggesting advantages from specialization. Over time, the declining magnitudes and the prevalence of scope (dis)economies in both groups suggest that loan-only MFIs have been able to serve costlier marginal clients while savings-and-loan MFIs have been learning and decreasing their scope diseconomies. Stakeholders encouraging the transformation of MFIs into regulated savings-and-loan institutions that serve both rural and urban markets should be aware of the presence of scope diseconomies for that business type and offer adequate support.

Assessing complementary synergies for integrated crop–livestock systems under conservation agriculture in Tunisian dryland farming systems

The aim of this paper is twofold. The first objective is to measure the technical efficiency of mixed crop-livestock (CL) smallholder producers operating under conservation agriculture systems in Tunisian rainfed areas. The second objective is to explore complementarities, synergies, and economies of diversification across the different production system components of these crop-livestock producers using the cross-partial derivative framework of output variables in the distance function. A simple random sampling process was employed to select and survey 59 CL smallholders operating under conservation agriculture. The collected data were analyzed using a stochastic input distance function in which synergies were estimated based on the second cross-partial derivative concept of output variables in the distance function. Results show that technical inefficiencies are significant in integrated crop-livestock systems, and there is evidence that economic diversification provides a productivity buffer against climate change threats. As a sustainable intensification strategy, this integrated system also offers a potential advantage. The results further contribute to the debate on crop diversification vs. specialization. Although an enhanced system integration could be a financially and ecologically viable option for mixed crop-livestock systems, more pathways for profitable and viable diversification of cereal-based or orchard-based systems remain to be explored.

MENA Energy Trends, Global Energy Warming, and COVID-19 Crisis: An Investigation Analysis from Oil, Gas, Regional Economy, and Labor Productivity

With the complex presence of important natural reserves, energy is considered as the main key ingredient to facilitate economic development in the Middle East, GCC, and Maghreb regions. Expectations for a rapidly growing economy in the next decade will likely cause an increase in the fraction of energy consumed domestically, limiting what is available for export. Considered as the home of global oil and gas reserves, the Middle East and North Africa (MENA) region is the cornerstone of the global energy architecture, and the global low-carbon energy transition poses critical questions to MENA oil and gas producers. Unfortunately, as the coronavirus (COVID-19) pandemic sweeps across the world, growth in the MENA region was projected to fall to 2.8% in 2020, lower than the growth rates during the 2008 global financial crisis and the 2015 oil price shock. Before the coronavirus (COVID-2019), the sharp drop in oil and gas prices that began in 2015 fostered MENA hydrocarbon producers to launch ambitious economic reform programs in all regions. The main goal of these programs was not only to increase the diversification of investment sectors to boost national and regional economies but also to encourage the development of the nonhydrocarbon sector. This article argues for a new challenge investigation and analysis to figure out with current MENA policy options and future prospects, as well as the present impact of COVID-19, in addition to the public policies that encourage diversification economy sector to avoid entire dependence on oil and gas in export are dressed. It also deals with the investigation of the pressing need to create job opportunities for a large and youthful population and the new definition of the possibility of the world moving more aggressively towards low-carbon integration.

The Algerian agricultural sector between the question of food security and its implication in economic diversification strategy

AbstractThe agricultural sector in Algeria has always sparked a fascinating and captivating debate for years, in particular in the phase of economic transition started and triggered after the sharp fall in the price of the barrel and the need to adapt to the new, more liberal, and opened economic mechanism. Many scientific writings were devoted to this subject, in particular O. Bessaoud, S. Bedrani, M. Boukella, A. Daoudi, A. Djennane, and others, trying to demonstrate and approve the crucial role played by this sector in the national economy, others to enumerate and identify the hiccups and obstacles to the smooth running of it, but the result remains that agriculture (in all its branches and sub‐activities) does not seem to reach its cruising speed and is content just to meet the expectations and needs of domestic consumers, with particular attention to the prices and quality of products and goods supplied. Of course, we must not deny the efforts made by the State to revive this sector, through the investment programs and the financial envelopes granted, the most resounding consists in the PNDAR (National Agricultural and Rural Development Program) at the beginning 2000, but the result shows a deplorable situation, which does not find a real argument and explanation, despite the innumerable interventions of local administrations (banks, taxes, insurance, justice, customs, and others). So we find ourselves faced with a state of affairs that hardly favors a serious enough reflection on the future deadlines of the sector, in particular in a context where the question of food security arises acutely and the return to the problem of economic diversification (in which a more preponderant and crucial role is reserved for the agricultural sector) is making a strong comeback on the national scene. Our main problem is as follows: “Could the agricultural sector in Algeria succeed to guarantee food security and a contribution in the economic diversification of the State.” For this purpose, some findings can be traced such as the economic perspectives of agriculture, the question of food security, the future of Algerian economy, the policy and strategy of economic diversification, and others. The main results expected turned mainly about the evolution of agricultural products for food consumption, the tools to manage the policy of food security, the means used to realize the economic diversification, and the nature of relation between the agricultural sector and the economic diversification. The scientific methods to be exploited in this paper will be mainly a descriptive analysis based on exploring the agricultural production, the food's consumption evolution, and the evolution of some macroeconomic indicators. Regarding this fact, we will try, in this paper, to seriously and objectively examine what role this sector can play in a double vision: ensuring food security for the population and getting involved in economic diversification initiatives for better economic international competitiveness.

Economies of diversification and stochastic dominance analysis in French mixed sheep farms

AbstractFarm diversification is mainly driven by risk mitigation effects and economic gains related to complementarities between production activities. By combining these two aspects, we investigate diversification economies in a sample of French mixed sheep farming systems and rank these systems using stochastic dominance criteria. Partially diversified systems (Sheep-Grass, Sheep-Crop, Sheep-Landless) and fully diversified systems (Sheep-Grass-Crop-Landless) were evaluated. We find a high degree of diversification diseconomies in the sheep farming systems considered. The results also indicate that the fully diversified system is driven by its risk-reducing effects (including downside risk exposure) and that Sheep-Crop is the dominant system in terms of risk-adjusted returns.

Product and geographic market diversification in U.S. banking

Prior literature either estimates economies of product diversification or evaluates the effects of market expansion on bank performance, but few studies look at the intersection of product and geographic diversification. We examine if the market expansion opportunities resulting from deregulation helped improve diversification/scope economies exhibited by banks. We leverage spatiotemporal variation in the implementation of deregulation laws across states to identify this relationship using a difference-in-differences framework. We find that the inter/intrastate deregulation accounts for a modest but statistically significant decrease in diversification diseconomies, and these gains were long-lasting. The findings suggest that geographic and product diversification are complementary.

Diversification economies in dairy farming – empirical evidence from Germany

Abstract This article explores how farm size is related to economic benefits from diversification. Using a data set pertaining to Bavarian dairy farms (2000–2014), we estimate an input distance function (IDF) to derive cost complementarities between distinct outputs. A Bayesian estimation technique is used to improve the theoretical consistency of the IDF. The results show that small dairy farms are more likely to benefit from diversification between milk and livestock production, while larger farms tend to benefit from diversification between milk and crop production. Both managerial and policy implications are discussed.

Diversification, efficiency and productivity in catch share fisheries

This study investigates the relationship between diversification, technical efficiency (TE), and productivity in the US Gulf of Mexico commercial red snapper fishery. We estimated a vessel-level input-oriented stochastic distance frontier simultaneously with a technical inefficiency effects model using a 20-year unbalanced panel (1997–2016). The panel documented the fishing activities of 1,255 fishing vessels, 10 years before and after the adoption of the red snapper catch share program in 2007. Our study points to the desirability of diversification in catch share fisheries. It shows that red snapper fishers who diversified their fishing portfolio tended to be more productive and technically efficient. The study found evidence that diversification resulted in cost savings from catching multiple species (diversification economies), and that the productivity of the fleet increased (diversification efficiencies). The analysis also showed that the TE of the fleet increased in the catch share period. The average TE rose from 0.78 in the command and control period to 0.85 in the catch share period. Higher TE scores were associated with higher levels of diversification. Our results suggest that policies that encourage diversification such as reducing quota ownership caps, adjusting quota carryover provisions, and providing governmental assistance to increase participation in other fisheries deserve further attention.

Evaluating complementary synergies in integrated crop-livestock systems in Ghana

PurposeThe purpose of this paper is to investigate the characteristics of crop-livestock diversification among smallholders in the forest-savannah agroecological zone of Ghana.Design/methodology/approachThe study uses a stochastic input distance function to investigate the evidence of economies of diversification and its effect on determining diversification decisions of smallholders in Ghana. Furthermore, this study also explores evidence of scale economies in integrated crop-livestock systems among smallholder farmers.FindingsThe empirical results show that economies of diversification are significant in determining diversification decisions of smallholders. The economies of scale are evident in integrated crop-livestock systems in Ghana, suggesting that opportunities exist to expand crop-livestock outputs without employing additional inputs or improved production technologies. Crop-livestock diversification is a desirable strategy for improving overall farm productivity among smallholders in Ghana. Economies of diversification were found to be significant among the output combinations, maize with other crops and other crops with livestock, in integrated crop-livestock production systems.Research limitations/implicationsThis study is based on a cross-sectional data set. Hence, the findings may be subject to some limitations; however, the authors have sought to minimise such limitations.Practical implicationsThe results imply that crop-livestock diversification is a desirable strategy for improving overall farm productivity. Therefore, the findings are useful for policymakers to design appropriate strategies for enhancing the production of specific output combinations in crop-livestock diversification systems among smallholders in Ghana. Specifically, such policies should promote the production and integration of crops such as legumes with other crops, and livestock with other crops in diversified farming systems to enhance overall farm productivity. This will reduce food insecurity and poverty among rural farm households and the entire rural population.Originality/valueThese results indicate that to improve crop-livestock productivity through diversification, and reduce the effect of climate variability, it is imperative to provide the enabling environment that will facilitate and encourage production of these output combinations among smallholders in Ghana. The empirical results enhance the literature by providing empirical evidence of the complementary synergies and economies of diversification in integrated farming systems and, hence, make recommendations for improving these farming systems.Peer reviewThe peer review history for this paper is available at: https://publons.com/publon/10.1108/IJSE-04-2019-0274.

Economies of diversification in microfinance: Evidence from quantile estimation on panel data

Prior studies of the diversification-driven cost savings from the joint provision of credit and deposits in microfinance usually ignore the multi-way heterogeneity across MFIs which vary substantially in size, business model, target clientele and operate in diverse environments. Using a quantile panel data model with correlated effects capable of accommodating multiple heterogeneity, we show that the typical measurement of economies of diversification at the mean provides an incomplete and distorted picture of their magnitude and prevalence in the industry. While we find statistically significant estimates, they are modest for most small-size MFIs but are quite substantial for large-scale institutions.

A Review on Impacts of Road Activities and Vehicular Emissions on Native Ecosystems in Mountainous Region

India’s transport network is one of the most extensive in the world. Road network is vital for sustained and inclusive growth of the economy and consolidation of social diversification of the nation. When compared to other transport means, road transport is considered to be more flexible and consumer-friendly as it provides door-to-door service to the people even in the remotest parts of the country. With the increasing population, there is immense load on natural as well as man-made resources. With growing development, people are more and more dependent on the transport system for fulfilling their needs and expansions. Thus, these road activities greatly affect environment qualities. The present review discusses the impacts of road activities on soil, water, and air quality and noise nuisance.

Measuring and decomposing economies of diversification: An application to biogas-fuelled cogeneration plants in Austria

This paper investigates the existence and the degree of economies of diversification for small-scaled, renewable-fuelled cogeneration systems using 2014 cross-sectional data from 67 Austrian biogas plants. It is the first study applying the recently introduced concept of economies of diversification proposed by Chavas and Kim (2010), which is a generalization and decomposition of economies of scope. Economies of diversification are decomposed into three additive parts: a part measuring complementarity among outputs; a part reflecting economies of scale; a part reflecting convexity. In addition, this paper extends the decomposition introduced by Chavas and Kim (2010) in such a way that the contribution of each input to economies of diversification and its components can be investigated. The results indicate substantial cost savings from diversification. For very-small scaled plants (≤100 kWel) most of the cost savings come from scale economies. For larger plants (>250 kWel) positive complementarity and convexity effects are the main source of economies of diversification and outweigh the negative effect from scale diseconomies. In addition to substantial fuel/feedstock cost reductions, significant costs saving effects from the jointness in labour and other inputs positively contribute to the complementarity effect. While on average capital and labour costs positively contribute to economies of scale, feedstock costs work in the direction of diseconomies of scale.

Soil and water conservation practices and smallholder farmer multi-activity technical efficiency in northern Ghana

A greater number of the people of northern Ghana are peasants and poor, depending heavily on natural resources for their livelihoods. The poverty is caused partly by inadequate water availability and deteriorating soil conditions. As a result, various organizations promote the use of soil and water conservation practices in the area, but the link between the use of the practices and farmer multi-activity technical efficiency is yet to be shown empirically. The current study thus investigates this link using data from 445 households in the area. The study uses a stochastic input distance function and the results show adoption of conservation practices exerts positive effect on technical efficiency. The results further reveal significant diversification economies in smallholder production with complementarity effects in crop-livestock and livestock-off-farm combinations, and substitutability effects in crop-off-farm combination thereby highlighting the need for a holistic development of both the farm and off-farm sectors.Keywords: Soil and Water Conservation, Technical Efficiency, Diversification Economies, Instrumental Variables, Northern Ghana

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There is approval that the MSMEs exert a great influence in the economy of the metropolitan area of Bucaramanga. The research sought to answer the question of how companies influence economic issues such as job creation and growth in sectors important to the metropolis. The document uses a methodology that crosses the reader through a combination of literature along with interviews and fieldwork surveys on MSMEs. This process aims to access the impact of MSMEs on the economy in terms of economic diversification and country dependence on the primary sector (mining and energy). This study provides supporting evidence that microenterprises play an essential role in economic diversification economy.

Local industrial structure, agglomeration economies and the creation of innovative start-ups: evidence from the Italian case

We explore the local factors associated with the emergence of innovative start-ups fostered by a targeted industrial policy intervention in Italy. We focus on the local industrial fabric and the agglomeration mechanisms, namely localization (specialization) economies, diversification economies and the proximity to large firms. Results show that both localization economies and diversification economies are at play. Notably, a greater presence of large firms at local level seems to support the creation of innovative start-ups. Other factors, such us the presence of technical and scientific universities and the urbanization, are found to encourage their formation. The contribution of local factors to the innovative start-up creation is found to be different depending on the regional development conditions. Our analysis outlines the features of a local ecosystem favourable to the emergence of these firms, providing policy makers with suggestions for moulding industrial policies to regional specific needs and to better exploit the local opportunities.

Nonfarm Activities and Household Production Choices in Smallholder Agriculture in Vietnam

Nonfarm Activities and Household Production Choices in Smallholder Agriculture in Vietnam

Specialisation and economies of scale or diversification and economies of scope? Assessing different agricultural development pathways

For decades agricultural development has been led by a modernisation paradigm based on specialisation, intensification and scale enlargement. This model of development model has been supported by means of price support policies and, often, strong central marketing agencies, which had a stabilising effect on prices and significantly reduced market risks for an array of commodities. The economic rationale of this model is based on the pursuit of economies of scale and highly efficient technical production. This model has led farmers to increasing their technical capacity and to neglect activities such as marketing, which was delegated to specialised marketing agencies.In this paper we argue that such specialisation has weakened the economic resilience of farms. Although a high level of specialisation allows farmers to be technically efficient, acquire highly specific production skills and apply the latest production techniques, it also leads specialised farms to be highly dependent on the commodity market(s) in which they operate, increasing their economic vulnerability. As markets have become deregulated, prices of both inputs and produce have become more volatile, often compromising the economic sustainability of these specialised farms.The weakened economic resilience of such farms has been aggravated by the gradual dismantling of producer price support causing an increase in price volatility, which has become a near-universal phenomenon for almost all agricultural produce. Highly specialised farming is now only viable where markets are stable and this requires the existence of effective market agencies and strong inter-branch organisations and/or the prevalence of contract farming.The increasing market orientation of the CAP, the fragmentation and weakening of marketing agencies and – last but not least– the growing societal demand for a more sustainable agriculture have led many farmers to rethink their farm development strategies. They are rediscovering farm diversification as one way of reducing market risks, as well improving the efficiency of the farm's organisation and resource use.Economies of scope emerge when a farmer can use the same input(s) to produce two or more products, and lower the cost of producing them separately. To achieve this end the inputs have to be complementary. By developing cost complementarities between different crops or livestock species, diversified farms can become more efficient than specialised farms.Another way that diversified farms can increase their economic sustainability is to partially produce for niche markets thereby generating a higher added value. A product mix of high quality products, possibly from the same production sector, but aimed at different, specific, market segments can further contribute to increasing the overall profitability of diversified farms.This paper summarises a series of case studies from EU member states and Israel which illustrate how farmers are experimenting with alternative pathways of development based on diversification. It is also shows the challenges they face. These include learning the skills for marketing high value-added farm products, establishing short food chains and the rebuilding supportive social and economic networks. The latter is particularly important when farms are too small to diversify effectively individually. Farms that participate in these economic networks are more able to internalise external economies generated within these networks and develop their knowledge of marketing and production through close cooperation with other farms. In some of the case studies the success of diversification clearly depended on the ability of farms to collaborate and share knowledge especially when new technical capacities for say, introducing crop diversification or intercropping, needed to be acquired. The knowledge involved in developing new crop rotation patterns, knowing about crop associations and combinations of crop and livestock activities was either developed ex novo or by rediscovering traditional knowledge. At the same time training in marketing food products is also a key to successfully shifting from being a specialised farm to a diversified one.Farmers need encouragement in order to work together and share their knowledge and experiences of diversification strategies. To this end policies that support collaborative networks are needed. Policies are also required to help establish and sustain collective marketing initiatives, especially short and direct supply chains. Finally, public support to assure against market risks is very helpful when farmers are entering into new markets. These policies are essential to support the existing processes of change that are occurring at grassroots level which are leading to a new model of farm modernisation.The specific contribution that this paper makes to the rural social science literature is to empirically highlight the limitations of theories about the benefits of economies of scale.

Economies of diversification in the US credit union sector

SummarySignificant scale economies have been recently cited to rationalize a dramatic growth in the US retail credit union sector over the past few decades. In this paper, we explore another plausible supply‐side explanation for the growth of the industry, namely economies of diversification. We focus on the fact that credit unions differ among themselves in the range of financial services they offer to their members. Since larger credit unions tend to offer a more diversified financial service menu than credit unions of a smaller size, the incentive to grow in size may be fueled not only by present scale economies but also by economies of diversification. This paper provides the first robust estimates of such economies of diversification for the credit union sector. We estimate a flexible semiparametric smooth coefficient quantile panel data model with correlated effects that is capable of accommodating a four‐way heterogeneity among credit unions. Our results indicate the presence of non‐negligible economies of diversification in the industry. We find that as many as 27–91% (depending on the type and the cost quantile) of diversified credit unions enjoy substantial economies of diversification; the cost of most remaining credit unions is invariant to the scope of services. We also find overwhelming evidence of increasing returns to scale in the industry.