Cost Function in the Pension Fund Management Industry in Argentina: An Analysis of the Regulatory Changes

Abstract

In this paper we address two important issues for the young pension fund industry in Argentina: (i) How can individual funds be ranked according to their efficiency? and (ii) How have recent regulations -mainly, limiting the use of promotion for transferring members and allocating residual members not according to market shares but evenly among the funds- influenced costs? Panel data are used to estimate a cost frontier and relative efficiency is defined accordingly as the distance between firms' actual costs and the frontier. We find that regulation has increased total costs but has not modified relative efficiency to a significant extent.