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Labor-Cost Efficiency with Indivisible Outputs and Inputs: A Study of Indian Bank Branches

Author

Listed:
  • Subhash C. Ray

    (University of Connecticut)

  • Abhiman Das

    (Indian Institute of Management)

  • Kankana Mukherjee

    (Babson College)

Abstract

This study uses Data Envelopment Analysis to examine the efficiency of 536 branches of a major Indian public sector bank across four large metropolitan cities. Unlike previous papers on branch banking in India we model branch operations following the production approach and introduce several methodological extensions to account for the product mix of branches in creating the efficient cost frontier. Our results indicate that there is significant labor cost inefficiency in the operations of the branches. Overall Chennai branches are the most efficient both with respect to their metro specific best-practice frontier as well as the grand frontier. While deposit oriented branches in Kolkata are considerably efficient with respect to their metro specific frontier, branches of other orientations perform quite poorly. Across the three types of labor, attaining efficiency in the number of clerks would have the highest impact in terms of cost savings.

Suggested Citation

  • Subhash C. Ray & Abhiman Das & Kankana Mukherjee, 2017. "Labor-Cost Efficiency with Indivisible Outputs and Inputs: A Study of Indian Bank Branches," Working papers 2017-04, University of Connecticut, Department of Economics.
    • Handle: RePEc:uct:uconnp:2017-04
    Note: Subhash Ray is the corresponding author
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    References listed on IDEAS

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    Keywords

    Data envelopment analysis; Indian banking; Labor-cost efficiency; Indivisible outputs and inputs;
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