Measuring output, efficiency and economies of scale in the Brazilian banking sector

Author(s)

Thomas Fujiwara

• Document type: Master's Dissertation
• Press: São Paulo.
• Institution: Universidade de São Paulo (USP). Faculdade de Economia, Administração e Contabilidade (FEA/SBD)
• Defense date: 2006-08-15

Examining board members

Marcio Issao Nakane; Ana Carla Abrão Costa; Danilo Camargo Igliori

• Advisor: Marcio Issao Nakane

Abstract

This work applies the Wang (2003a, 2003b) methodology to define Brazilian banks\' output. It is believed that this new output measure is superior to the ones commonly used by the literature, since it treats output as a flow variable, provides a theoretical basis for defining the role of deposits and takes account of risk exposure in defining output. This new measure is applied to the estimation of stochastic production and cost frontiers for the Brazilian banking sector, aiming at measuring its technical and economic efficiency, and also the size of its scale economies. The frontiers follow a Fourier flexible functional form especification and incorporate efficiency determinants. The results point to the existence of high inneficiency in the banking industry, and also to the ocurrence of increasing returns to scale. (AU)