Cost efficiency, Economies of Scale, Technological Progress and Productivity in Indonesian Banks

This study estimates cost efficiency, scale economies, technological progress and productivity growth for Indonesian banks over the period 1993-2000. Overall the cost efficiency of all banks during this period was 69.82%. However, on average the efficiency of banks prior to the Asian crisis and after the Asian crisis were 79.67% and 53.40% respectively. Moreover, the results also indicate that private-owned banks and joint venture/foreign banks were more efficient than public-owned banks. Furthermore, as expected large banks tend to be more efficient as compared to smaller banks. Total factor productivity growth for Indonesian banks over the period 1993-2000 was -3.14%. However, before the Asian crisis, Indonesian banks productivity decreased by 1.48%, while after the crisis it decreased by 6.45%. JEL Classification: G21.