Scale Economies in the N.S.W. Permanent Building Society Industry

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Abstract
The cost relationships of Building Societies in New South Wales are examined with a view to determining the existence of scale economies. A series of cost equations for each year from 1976 to 1980 inclusive are estimated assuming the underlying production function is Cobb-Douglas. Through the process of examining these cost relationships a rigorous methodology for evaluating scale economies is developed. The existence of scale economies is established as well as a marginal decline in the magnitude of scale economies over the study period.

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