This paper estimates economies of scale and scope in the commercial banking system of Argentina. In doing so, it allows to measure the impact on efficiency of the size of firms and of the product mix. A multiproduct translog cost function is estimated with cross sectional data taken from balance sheets. The results confirm the need to consider banks as multioutput producers and that the translog specification is more appropriate than the traditional Cobb Douglas one. Using the estimated parameters, scale and scope effects and market structure are investigated. The results show that the system as a whole operates with increasing returns to scale, large banks are more efficient than medium and small ones although there is no evidence of natural monopoly in the system. Finally, it appears that certain types of specialization could have significant cost advantages compared with multiproduction.
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Article provided by Instituto de Economía. Pontificia Universidad Católica de Chile. in its journal Cuadernos de Economía.
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