Efficiency, Technical Change, and Returns to Scale in Large U.S. Banks: Panel Data Evidence from an Output Distance Function Satisfying Theoretical Regularity

Guohua Feng () and Apostolos Serletis

No 5/09, Monash Econometrics and Business Statistics Working Papers from Monash University, Department of Econometrics and Business Statistics

Abstract: This paper provides parametric estimates of technical change, efficiency change, economies of scale, and total factor productivity growth for large banks (those with assets in excess of $1 billion) in the United States, over the period from 2000 to 2005. This is done by estimating an output distance function subject to theoretical regularity within a Bayesian framework. We find that failure to incorporate theoretical regularity conditions results in mismeasured shadow revenue and/or cost shares, which in turn leads to perverse conclusions regarding productivity growth. Our results from the regularity-constrained model show that total factor productivity of the large U.S. banks grew at an average rate of 1.98% over the sample period. However, our estimates also show a clear downward trend in the growth rate of total factor productivity and our decomposition of the primal Divisia total factor productivity growth index into its three components - technical change, efficiency change, and economies of scale - indicates that technical change is the driving force behind this decline.

Keywords: Productivity decomposition; Translog output distance function. (search for similar items in EconPapers)
JEL-codes: C11 D24 G21 (search for similar items in EconPapers)
Pages: 48 pages
Date: 2009-06-24
New Economics Papers: this item is included in nep-ban and nep-eff
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

Downloads: (external link)
http://www.buseco.monash.edu.au/ebs/pubs/wpapers/2009/wp5-09.pdf (application/pdf)

Related works:
Journal Article: Efficiency, technical change, and returns to scale in large US banks: Panel data evidence from an output distance function satisfying theoretical regularity (2010)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:msh:ebswps:2009-5

Ordering information: This working paper can be ordered from
http://business.mona ... -business-statistics

Access Statistics for this paper

More papers in Monash Econometrics and Business Statistics Working Papers from Monash University, Department of Econometrics and Business Statistics PO Box 11E, Monash University, Victoria 3800, Australia. Contact information at EDIRC.
Bibliographic data for series maintained by Professor Xibin Zhang ().