| Abstract | dc.description.abstract | This paper presents estimations of cost functions for a panel of firms from the Uruguayan commercial private banking sector, testing for economies of scale and scope and technical change between 1989 and 1993. Using a translog specification with fixed effects for bank operating costs, the paper demonstrates the inexistence of economies of scale for all classes of bank size as measured by their total number of employees. However, the finding of constant returns to scale in the case of smaller banks suggests that this class of banks has cost advantages over those of bigger size. These results and the concavity of the cost function show the absence of a natural monopoly. Regarding scope economies, no significant complementarities between products were found except for the biggest banks, where banking services and loans show an important degree of complementarity. Two approaches are made to the study of technical change: fitting a standard time trend and a time-specific index, which both give consistent results in the case of the average firm. Results differ however by firm size: in the smaller firms there was not any significant change affecting products or inputs, while the average and bigger ones not only displayed autonomous change but also showed increasing returns in the holdings of government bonds. The time index method (applied only to average firms) suggests this change takes place since 1991. While across all the period in neither case the hypothesis of neutrality of technical change (in Hick's sense) could be rejected, the time index method suggests that some kind of labour-saving technical change was undertaken between 1989 and 1990. | en_US |
