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Total factor productivity growth in banking: The Israeli banking sector 1979–1982

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Abstract

The primary focus of this paper is the modeling and estimation of total factor productivity growth in banking. The measured total factor productivity growth is decomposed into its main components: 1) scale economy and output growth, 2) branching effect, and 3) technological change effect. Our findings indicate that total factor productivity grew at an annual average rate of 7.8% for the 1979–1982 period but this growth has slowed down to only 2.9% for the 1981–1982 period. Scale economy and output growth have contributed to about four-fifths of the growth, whereas branch growth and technical change have contributed to one-fifth of the growth. An important observation is the increasing importance of both branch growth and technical change throughout the period, especially for smaller banks.

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Authors and Affiliations

  1. University of Haifa, Israel

    Moshe Kim

  2. University of British Columbia, Vancouver, Canada

    Moshe Kim

  3. Bank of Israel, Examiner of Banks, Jerusalem, Israel

    Jacob Weiss

Authors
  1. Moshe Kim
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  2. Jacob Weiss
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The refereeing process of this paper was handled by J. van den Broeck.

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Kim, M., Weiss, J. Total factor productivity growth in banking: The Israeli banking sector 1979–1982. J Prod Anal 1, 139–153 (1989). https://doi.org/10.1007/BF00157793

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