Banking Geography and Cross-Fertilization in the Productivity Growth of US Commercial Banks
AbstractThe US banking industry offers a unique, natural and fertile environment to study geography's effects on banks' behavior and performance. The literature on banks' operating performance, while extensive, says little about the influence of spatial interactions on banks' performance. We compute and examine, using a physical distance-based spatio-temporal empirical model, the state-wide total factor productivity growth (TFPG) indices of US commercial banks for each state for the 1971-1995 period. We observe that the productivity growth of commercial banks in state i depends strongly, positively, and contemporaneously on the productivity growth of commercial banks located in state i's contiguous states. Further, “regulatory space” appears to induce frictions and lessen the documented spatial interactions. These findings support our plea that research on commercial banking sector's behavior need to pay a particular attention to the effects of banking geography.
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Bibliographic InfoPaper provided by Koc University-TUSIAD Economic Research Forum in its series Koç University-TUSIAD Economic Research Forum Working Papers with number 1108.
Length: 36 pages
Date of creation: Apr 2011
Date of revision:
Spatial; Commercial Banks; Total Factor Productivity Growth; Kalman Filter;
Find related papers by JEL classification:
- D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
- K23 - Law and Economics - - Regulation and Business Law - - - Regulated Industries and Administrative Law
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-04-16 (All new papers)
- NEP-BAN-2011-04-16 (Banking)
- NEP-EFF-2011-04-16 (Efficiency & Productivity)
- NEP-GEO-2011-04-16 (Economic Geography)
- NEP-URE-2011-04-16 (Urban & Real Estate Economics)
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- Tabak, Benjamin M. & Miranda, Rogério Boueri & Fazio, Dimas M., 2013.
"A geographically weighted approach to measuring efficiency in panel data: The case of US saving banks,"
Journal of Banking & Finance,
Elsevier, vol. 37(10), pages 3747-3756.
- Benjamin M. Tabak & Rogério B. Miranda & Dimas M. Fazio, 2012. "A Geographically Weighted Approach in Measuring Efficiency in Panel Data: the Case of US Saving Banks," Working Papers Series 275, Central Bank of Brazil, Research Department.
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