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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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  8. Quah, Danny, 1996. "Twin Peaks: Growth and Convergence in Models of Distribution Dynamics," CEPR Discussion Papers 1355, C.E.P.R. Discussion Papers.
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  11. 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.
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  14. Quah, Danny, 1993. " Galton's Fallacy and Tests of the Convergence Hypothesis," Scandinavian Journal of Economics, Wiley Blackwell, vol. 95(4), pages 427-43, December.
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