Evaluating Productivity Change in Turkish Banking Industry: A Micro Approach
The main goal of this paper is to estimate the most appropriate production function for Turkish banking industry over the 1980–2006 period. The empirical analysis shows that Cobb-Douglas type production function and with credit dependent variable is the most appropriate model of the banking sector. This function indicates that constant return to scale is valid for Turkish banking sector. Accepting personnel and fixed assets as inputs, it is found that as personnel use increases in the production process, the output level increases more than the increase in personnel. Thus If the main purpose is to increase the credit amount, banks should employ much more personnel rather than fixed assets considering the substitution relationship between labor and capital and the parameters of the production function is found to be changed with restructuring program.
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