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Bank cost efficiency as distribution dynamics: controlling for specialization is important

This paper analyzes the dynamics of cost efficiency scores in the Spanish banking industry during the 1985—1995 period and the way in which such dynamics are influenced by specialization. Efficiency is estimated by a nonparametric approach, and a model of distribution dynamics has been applied to assess the evolution of efficiency scores over time. Results show that efficiency at the industry level (mean effciency) has increased importantly and that, considering how the entire distribution evolves, there are some important patterns that the mean and the standard deviation fail to uncover, such as multi-modality. In addition, more light is shed on efficiency dynamics when each firm’s output mix is controlled for, as efficiency scores tend to become closer much faster.

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Article provided by Fundación SEPI in its journal Investigaciones Economicas.

Volume (Year): 27 (2003)
Issue (Month): 1 (January)
Pages: 71-96

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Handle: RePEc:iec:inveco:v:27:y:2003:i:1:p:71-96
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  1. Grifell-Tatje, E. & Lovell, C. A. K., 1997. "The sources of productivity change in Spanish banking," European Journal of Operational Research, Elsevier, vol. 98(2), pages 364-380, April.
  2. Resti, Andrea, 1997. "Evaluating the cost-efficiency of the Italian Banking System: What can be learned from the joint application of parametric and non-parametric techniques," Journal of Banking & Finance, Elsevier, vol. 21(2), pages 221-250, February.
  3. Quah, Danny, 1993. "Galton's Fallacy and Tests of the Convergence Hypothesis," CEPR Discussion Papers 820, C.E.P.R. Discussion Papers.
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  7. Joaquín Maudos Villarroya, 1996. "Market structure and performance in Spanish banking using a direct measure of efficiency," Working Papers. Serie EC 1996-12, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  8. Danny Quah, 1992. "Empirical Cross-Section Dynamics in Economic Growth," FMG Discussion Papers dp154, Financial Markets Group.
  9. Francisco Pérez García & Emili Tortosa Ausina, 1998. "Product Mix Of The Spanish Banking Firms: Do Competition Clubs Exist?," Working Papers. Serie EC 1998-02, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  10. Ferrier, Gary D. & Lovell, C. A. Knox, 1990. "Measuring cost efficiency in banking : Econometric and linear programming evidence," Journal of Econometrics, Elsevier, vol. 46(1-2), pages 229-245.
  11. Joaquín Maudos, 1996. "Eficiencia, cambio técnico y productividad en el sector bancario español: una aproximación de frontera estocástica," Investigaciones Economicas, Fundación SEPI, vol. 20(3), pages 339-358, September.
  12. Danny Quah, 1996. "Twin Peaks: Growth and Convergence in Models of Distribution Dynamics," CEP Discussion Papers dp0280, Centre for Economic Performance, LSE.
  13. Quah, Danny, 1997. "Empirics for Growth and Distribution: Stratification, Polarization, and Convergence Clubs," CEPR Discussion Papers 1586, C.E.P.R. Discussion Papers.
  14. Quah, Danny T., 1996. "Regional convergence clusters across Europe," European Economic Review, Elsevier, vol. 40(3-5), pages 951-958, April.
  15. José Manuel Pastor Monsálvez, 1995. "Eficiencia, Cambio Productivo Y Cambio Técnico En Los Bancos Y Cajas De Ahorro Españolas: Un Análisis Frontera No Paramétrico," Working Papers. Serie EC 1995-09, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  16. Quah, Danny T, 1996. "Twin Peaks: Growth and Convergence in Models of Distribution Dynamics," Economic Journal, Royal Economic Society, vol. 106(437), pages 1045-55, July.
  17. Emili Tortosa Ausina, 1999. "-Convergence In Efficiency Of The Spanish Banking Firms As Distribution Dynamics," Working Papers. Serie EC 1999-14, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  18. Amel, Dean F & Rhoades, Stephen A, 1988. "Strategic Groups in Banking," The Review of Economics and Statistics, MIT Press, vol. 70(4), pages 685-89, November.
  19. PARK, Byeong & TURLACH, Berwin, 1992. "Practical performance of several data driven bandwidth selectors," CORE Discussion Papers 1992005, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  20. R Koopmans & A Lamo, 1995. "Cross-Sectional Firm Dynamics: Theory and Empirical Results from the Chemical Sector," CEP Discussion Papers dp0229, Centre for Economic Performance, LSE.
  21. Quah, Danny, 1996. "Regional Convergence Clusters Across Europe," CEPR Discussion Papers 1286, C.E.P.R. Discussion Papers.
  22. J Andres & A Lamo, 1995. "Dynamics of the Income Distribution across OECD Countries," CEP Discussion Papers dp0252, Centre for Economic Performance, LSE.
  23. Jondrow, James & Knox Lovell, C. A. & Materov, Ivan S. & Schmidt, Peter, 1982. "On the estimation of technical inefficiency in the stochastic frontier production function model," Journal of Econometrics, Elsevier, vol. 19(2-3), pages 233-238, August.
  24. Rafael Domenech Vilariño, 1993. "Funciones de costes para la banca española: un análisis con datos de panel," Investigaciones Economicas, Fundación SEPI, vol. 17(2), pages 263-284, May.
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