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Technical Progress, Inefficiency, and Productivity Change in U.S. Banking, 1984-1993

David C. Wheelock and Paul W. Wilson
Journal of Money, Credit and Banking
Vol. 31, No. 2 (May, 1999), pp. 212-234
DOI: 10.2307/2601230
Stable URL: http://www.jstor.org/stable/2601230
Page Count: 23
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Technical Progress, Inefficiency, and Productivity Change in U.S. Banking, 1984-1993
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Abstract

Studies often find that, on average, U.S. commercial banks are quite inefficient, and we find that banks became more technically inefficient between 1984 and 1993. From a new decomposition of the Malmquist productivity index into changes in pure technical and scale efficiency, as well as both pure technical changes and changes in scale of technology, we find that much of the inefficiency increase can be attributed to the general failure of banks to adopt technological improvements made by a few banks that advanced the efficient frontier. Small banks experienced especially large decreases in both efficiency and productivity.

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