Deregulation and Productivity: The Case of Spanish Banks

Author: kumbhakar Subal   Lozano-Vivas Ana  

Publisher: Springer Publishing Company

ISSN: 0922-680X

Source: Journal of Regulatory Economics, Vol.27, Iss.3, 2005-05, pp. : 331-351

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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.