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Testing for Wage Overpayment in UK Financial Services: A Stochastic Frontier Approach

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  • Robert Webb
  • Duncan Watson
  • Tim Hinks

Abstract

The past ten years have witnessed a sharp rise in competition in UK financial services. This has been due to factors such as liberalisation, increases in technology and advancing globalisation. As a result of these pressures there has been an increasing emphasis placed on cost management and overall efficiency in the financial services firm. This article examines the impact of these developments on the degree of wage overpayment in the UK financial services sector between 1991 and 1999. By utilising stochastic frontier methodology, we surprisingly find that overpayment levels are large at around 30 per cent and that there is no evidence of a decline in overpayment levels over the testable period.

Suggested Citation

  • Robert Webb & Duncan Watson & Tim Hinks, 2003. "Testing for Wage Overpayment in UK Financial Services: A Stochastic Frontier Approach," The Service Industries Journal, Taylor & Francis Journals, vol. 23(5), pages 123-136, November.
    • Handle: RePEc:taf:servic:v:23:y:2003:i:5:p:123-136
    DOI: 10.1080/02642060308565627
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    References listed on IDEAS

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    1. Leibenstein, Harvey, 1978. "General X-Efficiency Theory and Economic Development," OUP Catalogue, Oxford University Press, number 9780195023800.
    2. Berger, Allen N. & Humphrey, David B., 1997. "Efficiency of financial institutions: International survey and directions for future research," European Journal of Operational Research, Elsevier, vol. 98(2), pages 175-212, April.
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    Cited by:

    1. Leppin Julian S., 2014. "The Estimation of Reservation Wages: A Simulation-Based Comparison," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 234(5), pages 603-634, October.
    2. Wen-Jhan Jane, 2013. "Overpayment and Reservation Salary in the Nippon Professional Baseball League," Journal of Sports Economics, , vol. 14(6), pages 563-583, December.
    3. Luz A. Florez & Ligia Alba Melo-Becerra & Carlos Esteban Posada, 2021. "Estimating the reservation wage across city groups in Colombia: A stochastic frontier approach," Borradores de Economia 1163, Banco de la Republica de Colombia.

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