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Productivity and computers in Canadian banking

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  • Darrell Parsons
  • Calvin Gotlieb
  • Michael Denny

Abstract

Canadian banks have invested millions in computer systems in the last two decades. Yet the banks and outside observers have been uncertain that these investments have had net benefits. In this paper, unique data collected directly from a bank is used to investigate the impact of these investments on bank output, input and productivity. Using data from 1974–1987, a translog cost model is estimated. Both capital and labor are divided into information and noninformation inputs. The results are generally consistent with economic theory. The attempt to separate technical change from possible scale effects is very sensitive to alternative specification. Overall there has been some productivity growth associated with the changing computer technology. However, many of the benefits seem to have accrued to the customer and have not directly lead to gains for the bank. Copyright Kluwer Academic Publishers 1993

Suggested Citation

  • Darrell Parsons & Calvin Gotlieb & Michael Denny, 1993. "Productivity and computers in Canadian banking," Journal of Productivity Analysis, Springer, vol. 4(1), pages 95-113, June.
    • Handle: RePEc:kap:jproda:v:4:y:1993:i:1:p:95-113
    DOI: 10.1007/BF01073468
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    References listed on IDEAS

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    1. Robert J. Gordon, 1987. "The Postwar Evolution of Computer Prices," NBER Working Papers 2227, National Bureau of Economic Research, Inc.
    2. Martin Marimont, 1969. "Measuring Real Output for Industries Providing Services: OBE Concepts and Methods," NBER Chapters, in: Production and Productivity in the Service Industries, pages 15-52, National Bureau of Economic Research, Inc.
    3. Dennis J. Fixler & Kimberly D. Zieschang, 1992. "User Costs, Shadow Prices, and the Real Output of Banks," NBER Chapters, in: Output Measurement in the Service Sectors, pages 219-243, National Bureau of Economic Research, Inc.
    4. Sickles, Robin C., 1985. "A nonlinear multivariate error components analysis of technology and specific factor productivity growth with an application to the U.S. Airlines," Journal of Econometrics, Elsevier, vol. 27(1), pages 61-78, January.
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