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A Geographically Weighted Approach in Measuring Efficiency in Panel Data: the Case of US Saving Banks

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  • Benjamin M. Tabak
  • Rogério B. Miranda
  • Dimas M. Fazio

Abstract

The objective of this article is to discuss a new approach to control for the environment when one estimates efficiency by the stochastic frontier model. By introducing geographical weights and estimating local frontiers for each US saving bank for 2001-09, we find that bank technical performance is higher for most banks in comparison to a fixed-effects approach. This result highlights the importance of explicitly considering local environment and constraints while analyzing banks' behavior. All in all, this model has been proved very promising and viable for future empirical studies.

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File URL: http://www.bcb.gov.br/pec/wps/ingl/wps275.pdf
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Bibliographic Info

Paper provided by Central Bank of Brazil, Research Department in its series Working Papers Series with number 275.

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Date of creation: Apr 2012
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Handle: RePEc:bcb:wpaper:275

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Web page: http://www.bcb.gov.br/?english

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