Deregulation and Productivity: The Case of Spanish Banks

Abstract

This paper deals with measuring total factor productivity (TFP) growth of financial institutions incorporating different types of deregulatory measures. TFP growth is decomposed into external, scale, and markup components. The external component is further dissected into deregulation and technical change components. The TFP growth relationship is included as an additional equation in estimating the cost system. The empirical model uses panel data on Spanish banks (savings and commercial banks). We find that deregulations contributed positively to TFP growth for both savings and commercial banks. Furthermore, domestic (European) deregulations had a greater effect on TFP growth of savings (commercial) banks. Copyright Springer Science+Business Meida, Inc. 2005total factor productivity, markup, deregulation, and technical change,

The Effects of Privatization and Consolidation on Bank Productivity: Comparative Evidence from Italy and Germany

“…Consistent with this observation, the privatization of banks has increased their productivity and the improvement is remarkably significant not only statistically but also in economic terms, although some of the improvement seems to be reversed in the longer run. This result is in line with Kumbhakar et al (2001) and Kumbhakar and Lozano-Vivas (2005) who report increasing bank productivity after deregulation. With regard to consolidation in the Italian banking sector, voluntary mergers have an immediate and positive effect on productivity.…”

“…But he also reports increased cost inefficiency as a result of deregulation. In contrast, Kumbhakar and Lozano-Vivas (2005) find that deregulation in the Spanish banking industry contributes univocally positive to TFP growth through both reductions of inefficiency and technical progress. In our analysis of privatization and consolidation, we therefore distinguish the respective effects on all three components of TFP change: scale effects, technical change, and efficiency developments.…”

“…We calculate the Divisia Index as the change in the ratio of total costs (C) to total output (Y ). It is a well-known fact that the Divisia method will usually deliver results that deviate from parametric methods; the gap between the two can sometimes be significant (Kumbhakar and Lozano-Vivas, 2005). One reason for the deviation is that the Divisia method necessarily also includes price changes that are usually not considered in parametric analysis.…”

Estimation of banking technology under credit uncertainty

“…Note that we do not seek to compare the indices obtained based on econometric models with the data-based (nonparametric) Divisia indices. Had our goal been to (econometrically) estimate the TFP index that is equal to the Divisia index, we could have imposed this equality in the estimation as, for instance, done by Kumbhakar and Lozano-Vivas (2005).…”

Technology-based total factor productivity and benchmarking: New proposals and an application

“…7 7 E.g., Lovell (1996, 1997), Lozano-Vivas (1997), Kumbhakar and Lozano-Vivas (2005), Más-Ruiz et al (2005), Tortosa-Ausina et al (2008) or Illueca et al (2009). In addition, there is a wide range of DEA studies that focus on some alternative aspects of benchmarking. We mention some recent examples.…”