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

Production frontiers with cross-sectional and time-series variation in efficiency levels

Journal of Econometrics, 1990

In this paper we consider the efficient instrumental variables estimation of a panel data model with heterogeneity in slopes as well as intercepts. Using a panel of U.S. airlines, we apply our methodology to a frontier production function with cross-sectional and temporal variation in levels of technical efficiency. Our approach allows us to estimate time-varying efficiency levels for individual firms without invoking strong distributional assumptions for technical inefficiency or random noise. We do so by including in the production function a flexible function of time whose parameterization depends on the firm. We also generalize the results of Hausman and Taylor (1981) to exploit assumptions about the uncorrelatedness of certain exogenous variables with the temporal pattern of the firm's technical inefficiency. Our empirical analysis of the airline industry over two periods of regulation yields believable evidence on the pattern of changes in efficiency across regulatory environments.

Testing whether two-stage estimation is meaningful in non-parametric models of production

2010

Simar and Wilson (J. Econometrics, 2007) provided a statistical model that can rationalize two-stage estimation of technical efficiency in non-parametric settings. Two-stage estimation has been widely used, but requires a strong assumption: the second-stage environmental variables cannot affect the support of the input and output variables in the first stage. In this paper, we provide a fully non-parametric test of this assumption; in addition, we provide a theoretical link to results obtained by Politis et al.(Statistica Sinica, 2001), allowing us to estimate critical values for our test statistics using bootstrap sub-sampling while optimizing the choice of sub-sample size by minimizing a measure of volatility. Our simulation results indicate that our tests perform well both in terms of size and power. We present a real-world empirical example by updating the analysis performed by Aly et al. (R. E. Stat., 1990) on U.S. commercial banks; our tests easily reject the assumption requir...

AN ABSTRACT OF THE THESIS OF Abinet Onkiso for the degree of Master of Science in Economics presented on June 10, 2009. Title: Efficiency and Productivity in U.S. Commercial Banking: A Non-Parametric Approach

2009

approved: _____________________________________________________________________ Victor J. Tremblay In this paper, I estimate efficiency and productivity change in the U.S. banking industry. The data consist of annual observations of 25 banks from 2004 to 2008. The paper follows a two-stage procedure. In the first-stage, utilizing the non-parametric methodologies, input-oriented Data Envelopment Analysis (DEA) model and DEA based Malmquist indices are used to estimate the efficiency scores for each bank in the sample. Further, the productivity index is decomposed into technical efficiency and technological change components. In the second-stage, I use Tobit censored regression to determine the impact of ‘environmental’ factors on banks’ efficiency. The results of DEA suggest that U.S. banks experienced an average annual productivity growth of almost 9 percent over the sample period as well as that the dominant source of efficiency is technological change (TC) which shows 10.8 percent...

Efficiency and productivity of the US banking industry, 1998-2005: evidence from the Fourier cost function satisfying global regularity conditions

Journal of Applied Econometrics, 2009

This paper provides estimates of bank efficiency and productivity in the United States, over the period from 1998 to 2005, using (for the first time) the globally flexible Fourier cost functional form, as originally proposed by , and estimated subject to global theoretical regularity conditions, using procedures suggested by . We find that failure to incorporate monotonicity and curvature into the estimation results in mismeasured magnitudes of cost efficiency and misleading rankings of individual banks in terms of cost efficiency. We also find that the largest two subgroups (with assets greater than 1 billion in 1998 dollars) are less efficient than the other subgroups and that the largest four bank subgroups (with assets greater than $400 million) experienced significant productivity gains and the smallest eight subgroups experienced insignificant productivity gains or even productivity losses.

Efficiency and Productivity Growth In Turkish Commercial Banking Sector: a Non-Parametric Approach

1998

The financial liberalisation policies adopted in 1980 brought radical changes to the heavily regulated commercial banking sector in Turkey. The sector attracted many domestic and foreign banks, which created vigorous competition. As a result, increased competition in the market raised important questions on bank performance and efficiency. In this context, we aim to analyse the technical efficiency and productivity change over the period 19992-1996. Utilising non-parametric methodologies, Data Envelopment Analysis (DEA) and DEA based Malmquist indices, we estimate the individual bank efficiencies and productivity changes which took place within this period. Further, we decompose the productivity index into frontier shifts (technical change) and catching up (technical efficiency) components.

How to Choose a Nonparametric Frontier Model? Technical Efficiency of Turkish Banks Assessing Global

Global Business Review, 2018

This article aims to address current gaps in the literature on banking efficiency using the data envelopment analysis (DEA) model. The study assesses the technical efficiency of the Turkish banking sector in the period spanning from 1990 to 2010 in-line with DEA model. In comparison with the DEA model, the CCR model (developed by Charnes, Cooper & Rhodes, European Journal of Operational Research, 1978, 2(6): 429–444) does not need model assumptions on input/output orientation. It also avoids the dilemma about the choice of input/output indicators. The comparison analysis of this study reveals that the CCR model yields more significant efficiency results than the BCC model (developed by Banker, Charnes & Cooper, Management Science, 1984, 30(9): 1078–1092). This study provides important contribution to the current empirical research on banking efficiency. The empirical results of the study reveal a steady increase in global efficiency of the Turkish banking sector over the past two de...