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

Jorge Streb () and Laura D'Amato ()

No 108, CEMA Working Papers: Serie Documentos de Trabajo. from Universidad del CEMA

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.

Keywords: short-run costs; potential output; capacity utilization (search for similar items in EconPapers)
JEL-codes: D24 G2 (search for similar items in EconPapers)
Date: 1996-02
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