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Semi-nonparametric Spline Modifications to the Cornwell-Schmidt-Sickles Estimator: An Analysis of U.S. Banking Productivity

Author

Listed:
  • Almanidis, Pavlos

    (Ernst & Young LLP, Toronto)

  • Karagiannis, Giannis

    (University of Macedonia)

  • Sickles, Robin C.

    (Rice U)

Abstract

This paper modifies the Cornwell, Schmidt and Sickles (CSS) (1990) time-varying specification of technical efficiency to allow for switching patterns in temporal changes, which may occur more than once during the sample period. For this purpose, we move from the (second-order) polynomial specification of the standard CSS to a spline function set up while keeping CSS's flexibility regarding the cross section dimension. The spline function specification of the temporal pattern of technical efficiency can accommodate more than one turning point and thus can be non-monotonic. This allows the modeler to account for firm or individual efficiency gains that can occur relatively quickly, for example, changes related to regulation or policy changes as well as those related to ownership/organization changes (e.g., merger or acquisitions).

Suggested Citation

  • Almanidis, Pavlos & Karagiannis, Giannis & Sickles, Robin C., 2015. "Semi-nonparametric Spline Modifications to the Cornwell-Schmidt-Sickles Estimator: An Analysis of U.S. Banking Productivity," Working Papers 15-008, Rice University, Department of Economics.
    • Handle: RePEc:ecl:riceco:15-008
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    Cited by:

    1. McKeown, Robert, 2017. "Where are the economies of scale in Canadian banking?," Queen's Economics Department Working Papers 274706, Queen's University - Department of Economics.
    2. A. Peyrache & A. N. Rambaldi, 2017. "Incorporating temporal and country heterogeneity in growth accounting—an application to EU-KLEMS," Journal of Productivity Analysis, Springer, vol. 47(2), pages 143-166, April.
    3. Robert McKeown, 2017. "Where Are The Economies Of Scale In Canadian Banking?," Working Paper 1380, Economics Department, Queen's University.

    More about this item

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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