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Information technology and productivity changes in the Italian banking industry

  • Luca Casolaro

    ()

    (Bank of Italy, Economic Research Department)

  • Giorgio Gobbi

    ()

    (Bank of Italy, Economic Research Department)

This paper analyzes the effect of information technologies (IT) in the financial sector using micro-data on a panel of over 600 Italian banks over the period 1989-2000. We estimate stochastic cost and profit functions allowing for individual banks� displacements from the efficient frontier and for non-neutral technological change. Data on IT capital stock for individual banks enable us to distinguish between movements along the efficient frontier and shifts of the frontier owing to the adoption of new technologies. We find that both cost and profit frontier shifts are strongly correlated with IT capital accumulation. Banks adopting IT capital intensive techniques are also more efficient. We interpret this last result as evidence of a catching-up effect consistent with the usual pattern of diffusion of the new technologies.

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Paper provided by Bank of Italy, Economic Research and International Relations Area in its series Temi di discussione (Economic working papers) with number 489.

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Date of creation: Mar 2004
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Handle: RePEc:bdi:wptemi:td_489_04
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