The study aims to measure the productivity of the Saudi banking sector at the retail level using secondary data for 11 local banks from the period 2015-2019. The study uses an extended version of the Cobb-Douglas production function to account for the fact that as banks openup more retail branches, they will need to employ more labor. The extended Cobb-Douglas production function was estimated using the two-way fixed effect model to account for unobserved heterogeneity across Saudi banks resulting from differences in labor competencies and leadership style. Besides, the model accounts for unobserved heterogeneity among Saudi banks due to the advancement in electronic services over time. The results showed that labor, branches, customers’ deposits, and fixed deposits have a positive effect on the total value of generated loans. Conversely, ATM has an insignificant effect on generated loans. The average scale elasticity shows that the Saudi banks at the retail level are operating under decreasing returns to scale. The average marginal rate of technical substitution shows that Saudi banks need at least one ATM to replace one unit of labor at the retail level while keeping the same level of output.

Abstract
1. Introduction
2. Literature Review
3. Research Methods and Materials
4. Results and Discussion
5. Conclusions
References

• Seham ALOTHMAN(Department of Agribusiness and Consumer Science, College of Agriculture and Food Science, King Faisal University, Saudi Arabia.)
• Mohammed AL-MAHISH(Department of Agribusiness and Consumer Science, College of Agriculture and Food Science, King Faisal University, Saudi Arabia) Corresponding Author