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Technical Progress, Inefficiency, and Productivity Change in U.S. Banking, 1984-1993

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Author Info
Wheelock, David C
Wilson, Paul W

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Abstract

Studies often find that, on average, U.S. commercial banks are quite inefficient, and the authors find that banks became more technically inefficient between 1984 and 1993. From a new decomposition of the Malmquist productivity index into changes in pure-technical and scale efficiency, as well as both pure technical changes and changes in scale of technology, they find that much of the inefficiency increase can be attributed to the general failure of banks to adopt technological improvements made by a few banks that advanced the efficient frontier. Small banks experienced especially large decreases in both efficiency and productivity.

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Publisher Info
Article provided by Blackwell Publishing in its journal Journal of Money, Credit and Banking.

Volume (Year): 31 (1999)
Issue (Month): 2 (May)
Pages: 212-34
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Handle: RePEc:mcb:jmoncb:v:31:y:1999:i:2:p:212-34

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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-2879

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Loretta J. Mester, 1987. "Efficient production of financial services: scale and scope economies," Business Review, Federal Reserve Bank of Philadelphia, issue Jan, pages 15-25.
  2. Allen N. Berger & Gerald A. Hanweck & David B. Humphrey, 1986. "Competitive viability in banking: scale, scope, and product mix economies," Research Papers in Banking and Financial Economics 82, Board of Governors of the Federal Reserve System (U.S.).
    Other versions:
  3. Hunter, William C & Timme, Stephen G, 1991. "Technological Change in Large U.S. Commercial Banks," Journal of Business, University of Chicago Press, vol. 64(3), pages 339-62, July. [Downloadable!] (restricted)
  4. Diewert, Erwin, 2007. "Index Numbers," UBC Departmental Archives diewert-07-01-03-08-17-23, UBC Department of Economics, revised 31 Jan 2007. [Downloadable!]
  5. David C. Wheelock, 1993. "Is the banking industry in decline? Recent trends and future prospects from a historical perspective," Review, Federal Reserve Bank of St. Louis, issue Sep, pages 3-22. [Downloadable!]
  6. Fare, Rolf & Shawna Grosskopf & Mary Norris & Zhongyang Zhang, 1994. "Productivity Growth, Technical Progress, and Efficiency Change in Industrialized Countries," American Economic Review, American Economic Association, vol. 84(1), pages 66-83, March. [Downloadable!] (restricted)
  7. Chavas, Jean-Paul & Cox, Thomas L, 1990. "A Non-parametric Analysis of Productivity: The Case of U.S. and Japanese Manufacturing," American Economic Review, American Economic Association, vol. 80(3), pages 450-64, June. [Downloadable!] (restricted)
  8. Berger, Allen N. & Humphrey, David B., 1991. "The dominance of inefficiencies over scale and product mix economies in banking," Journal of Monetary Economics, Elsevier, vol. 28(1), pages 117-148, August. [Downloadable!] (restricted)
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  9. Allen N. Berger & Anil K. Kashyap & Joseph Scalise, 1995. "The Transformation of the U.S. Banking Industry: What a Long, Strange Trip It's Been," Center for Financial Institutions Working Papers 96-06, Wharton School Center for Financial Institutions, University of Pennsylvania.
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  10. Allen N. Berger & David B. Humphrey, 1992. "Measurement and Efficiency Issues in Commercial Banking," NBER Chapters, in: Output Measurement in the Service Sectors, pages 245-300 National Bureau of Economic Research, Inc. [Downloadable!]
  11. Grosskopf, S, 1986. "The Role of the Reference Technology in Measuring Productive Efficiency," Economic Journal, Royal Economic Society, vol. 96(382), pages 499-513, June. [Downloadable!] (restricted)
  12. John H. Boyd & Mark Gertler, 1994. "Are banks dead?," The Region, Federal Reserve Bank of Minneapolis, issue Sep, pages 22-26.
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Emili Tortosa-Ausina, 2000. "Inefficient banks or inefficient assets?," Working Papers 200005, Department of Business Economics, Universitat Autonoma de Barcelona. [Downloadable!]
  2. Allen N. Berger & Loretta J. Mester, 2001. "Explaining the Dramatic Changes in Performance of U.S. Banks: Technological Change, Deregulation and Dynamic Changes in Competition," Center for Financial Institutions Working Papers 01-22, Wharton School Center for Financial Institutions, University of Pennsylvania. [Downloadable!]
    Other versions:
  3. Delmas, Magali & Tokat, Yesim, 2003. "Deregulation Process, Governance Structures and Efficiency: The U.S. Electric Utility Sector," Research Papers 1790, Stanford University, Graduate School of Business. [Downloadable!]
  4. Moffat, Boitnmelo & Valadkhani, Abbas, 2008. "Technical efficiency in Botswana’s financial institutions: a DEA approach," Economics Working Papers wp08-14, School of Economics, University of Wollongong, NSW, Australia. [Downloadable!]
  5. Trevor Fitzpatrick & Kieran McQuinn, 2005. "Labour Cost Efficiency in UK and Irish Credit Institutions," The Economic and Social Review, Economic and Social Studies, vol. 36(1), pages 45–66. [Downloadable!]
  6. Allen N. Berger & W. Scott Frame & Nathan H. Miller, 2002. "Credit scoring and the availability, price, and risk of small business credit," Working Paper 2002-6, Federal Reserve Bank of Atlanta. [Downloadable!]
    Other versions:
  7. David C. Wheelock & Paul Wilson, 2008. "Are credit unions too small?," Working Papers 2008-033, Federal Reserve Bank of St. Louis. [Downloadable!]
  8. Jorge Eduardo Galán Camacho & Miguel Sarmiento Paipilla, . "Banknote Printing At Modern Central Banking: Trends, Costs, And Efficiency," Borradores de Economia 476, Banco de la Republica de Colombia. [Downloadable!]
    Other versions:
  9. Emili Tortosa Ausina, 2002. "Sensitivity Analysis Of Efficiency And Malmquist Productivity Indices: An Application To Spanish Savings Banks," Working Papers. Serie EC 2002-30, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie). [Downloadable!]
  10. Sophocles N. Brissimis & Manthos D. Delis & Nikolaos I. Papanikolaou, 2008. "Exploring the Nexus between Banking Sector Reform and Performance: Evidence from Newly Acceded EU Countries," Working Papers 73, Bank of Greece. [Downloadable!]
    Other versions:
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