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Economies of Scale and Degree of Capacity Utilization. Evidence from Retail Banks in Argentina

Author

Listed:
  • Jorge M. Streb
  • Laura D'Amato

Abstract

The permanent income/transitory income distinction from consumption functions can be applied to cost functions. Transitory deviations of actual output from potential output, i.e. variations in capacity utilization, are relevant for the pattern of U-shaped average costs found in econometric studies. Data from retail banks in Argentina are used to illustrate this issue, with the number of branches as a proxy for potential output, and product per branch as a proxy for the utilization level. Economies of scale at the plant level can be reinterpreted as an indication of excess capacity in the banking industry.

Suggested Citation

  • Jorge M. Streb & Laura D'Amato, 1996. "Economies of Scale and Degree of Capacity Utilization. Evidence from Retail Banks in Argentina," CEMA Working Papers: Serie Documentos de Trabajo. 108, Universidad del CEMA.
  • Handle: RePEc:cem:doctra:108
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    File URL: http://www.ucema.edu.ar/publicaciones/download/documentos/108.pdf
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    References listed on IDEAS

    as
    1. Milton Friedman, 1957. "A Theory of the Consumption Function," NBER Books, National Bureau of Economic Research, Inc, number frie57-1, January.
    2. Jeffrey A. Clark, 1988. "Economies of scale and scope at depository financial institutions: a review of the literature," Economic Review, Federal Reserve Bank of Kansas City, issue Sep, pages 16-33.
    3. Barsky, Robert B & Miron, Jeffrey A, 1989. "The Seasonal Cycle and the Business Cycle," Journal of Political Economy, University of Chicago Press, vol. 97(3), pages 503-534, June.
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    More about this item

    Keywords

    short-run costs; potential output; capacity utilization;

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • G2 - Financial Economics - - Financial Institutions and Services

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