Competitive Differences in Input-Factor Utilization among Brazilian Financial Institutions

Abstract

Large banks in Brazil offering diverse services enjoy competitive advantages over smaller banks focused on more traditional products. Exactly how resources are utilized to generate these products, though, is still largely unknown. This research illustrates the input-factor utilization practices of institutions in the Brazilian financial services industry through the calculation of own and cross-price, Morishima, and Shadow elasticities. We find distinct and substantial differences in how the banks employ the factors of production, particularly with regard to labor and fixed capital. This novel insight should allow for a more informed and targeted decision-making process for policy makers and industry professionals.