Inefficiency X in Argentine private banking: Its importance with respect to economies of scale and economies of joint production

Working papers (original series) | 1996 | N 1

Abstract

In the analysis of the costs of any industry, there are two particularly relevant elements: operational efficiency and the technological characteristics of production with respect to the volume and variety of products. If a competitive firm is a profit maximizer, it necessarily minimizes its costs, and therefore must be able to exploit all the sources of efficiency that intervene in their reduction. On the one hand, the firm must use inputs in optimal proportions and quantities given a level of production. In the banking cost literature, this source of cost reduction is known as X efficiency. Additionally, to be efficient from a technological point of view, the firm must operate with an optimal size in order to exploit existing economies of scale, as well how to offer adequate product diversity to take advantage of joint production economies, if these exist. The fundamental objective of this work is to obtain an estimate of the levels of inefficiency Secondly, the aim is to analyze the existence of economies of scale and economies of joint production or diversification.