Technical and allocative efficiency in European banking

This paper specifies an empirical framework for estimating both technical and allocative efficiency, which is applied to a large panel of European banks over the years 1996 2003. Our methodology allows self-consistent measurement inefficiency, in effort address issue known literature as Greene problem. The results suggest that, on average, exhibit constant returns scale, that efficiency are close 80% 75% respectively, overall economic shows clearly improving trend. We also show through comparison various estimators models incorporating only tend overestimate it.