A NOTE ON COST-STRUCTURE AND ECONOMIES OF SCALE IN GREEK BANKING

This note studies the Greek banking industry in 1980-1989 in order to estimate a representative cost structure functional form and search fo r economies of scale. The constructed model uses a translogarithmic co st function that includes the size of assets, capital, labor and techn ological progress. By using this model, which has been used by Benston et al. (1982), Hunter and Timme (1986) and others, we have been able to estimate for the first time an econometric form of the costs in Gre ek banking, and we have been able to investigate economies of scale in the Greek banking industry. Although operating-cost scale economies d o exist, total-cost scale economies were not present. This has been sh own through the utilization of a large sample of pooled data of all Gr eek banks for a period of ten years, and the use of two other samples of large and small banks. Moreover, by exploiting the properties of th e model, we shall be able to show whether technological progress has b een a factor which lowers bank costs.