International comparison of bank production characteristics and technological change

Abstract

In this paper, we conduct an international comparison of bank production and technological characteristics. The comparison is performed using novel evidence on changes in labour demand over the period 1980–89 for banks headquartered in Canada, France, West Germany, Italy, Japan and the United States. The results suggest that there is relatively low substitutability of labour for capital in the production process of these banking organizations. Significant scale economies were found with regards to the expansion of output and the concomitant increase in labour. In addition, technological change operated to lower the quantity of inputs needed to produce a given level of outputs and increased the minimum efficient-size bank over the sample period. Many of the production characteristics and technology effects varied significantly across countries. These findings imply that intercountry differences in production characteristics and technological change should be explicitly recognized in bank strategic planning...