Large U.S. Banks: Panel Data Evidence from an Output Distance Function Satisfying Theoretical Regularity
نویسندگان
چکیده
This paper provides parametric estimates of technical change, e¢ ciency 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 nd 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, e¢ ciency change, and economies of scale indicates that technical change is the driving force behind this decline. JEL classi cation: C11; D24; G21.
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E¢ ciency, Technical Change, and Returns to Scale in Large U.S. Banks: Panel Data Evidence Based on Bayesian Estimation of the Output Distance Function
This paper provides parametric estimates of technical change, e¢ ciency 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. In doing so, we propose a distance function based primal total factor productivity growth index, which is valid under both perfect and imperfec...
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