Abstract
Canadian banks have invested millions in computer systems in the last two decades. Yet the banks and outside observers have been uncertain that these investments have had net benefits. In this paper, unique data collected directly from a bank is used to investigate the impact of these investments on bank output, input and productivity. Using data from 1974-1987, a translog cost model is estimated. Both capital and labor are divided into information and noninformation inputs. The results are generally consistent with economic theory. The attempt to separate technical change from possible scale effects is very sensitive to alternative specification. Overall there has been some productivity growth associated with the changing computer technology. However, many of the benefits seem to have accrued to the customer and have not directly lead to gains for the bank.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Preview
Unable to display preview. Download preview PDF.
References
Berger, A.N., and D.B. Humphrey. (1990). “Measurement and Efficiency Issues in Commercial Banking.” Paper presented at the Conference on Income and Wealth, National Bureau of Economic Research.
Bowen, W. (1986). “The Puny Payoff from Office Computers.” Fortune, May 26, pp. 20–24.
Binhammer, H.H., and J. Williams. (1976). “Deposit-Taking Institutions: Innovation and the Process of Change.” Economic Council of Canada, Supply and Services Canada, Ottawa.
Daly, M.J., P.S. Rao, and R. Geehan. (1985). “Productivity, Scale Economies and Technical Change in the Canadian Life Insurance Industry.” International Journal of Industrial Organization No. 3, 345–361.
Denny, M., M. Fuss, and L. Waverman. (1981). “The Measurement and Interpretation of Total Factor Productivity in Regulated Industries, with Application to Canadian Telecommunications.” Measurement in Regulated Industries. T.G. Cowing, and R.E. Stevenson (eds.), New York: Academic Press, pp. 179–218.
Fixier, D.J., and K.D. Zieschang. (1990). “User Costs, Shadow Prices and the Real Output of Banks.” Paper presented at the Conference on Income and Wealth, National Bureau of Economic Research.
Fuss, M.A. (1983). “A Survey of Recent Results in the Analysis of Production Conditions in Telecommunications.” In L. Courville, A. De Fontenay, and R. Dobell (eds), Economic Analysis of Telecommunications, Theory and Applications. New York: North-Holland, pp. 3–26.
Geehan, R., and L. Allen. (1978). “Measuring the Real Output and Productivity of Credit and Savings Institutions.” Canadian Journal of Economics 11, 669–679.
Gilligan, T., M. Smirlock, and W. Marshall. (1984). “Scale and Scope Economies in the Multiproduct Banking Firm.” Journal of Monetary Economics No. 13, 67–77.
Gordon, R.J. (1989). “The Postwar Evolution of Computer Prices.” In D. Jorgenson and R. Landau (eds.), Technology and Capital Formation. Cambridge, MIT Press.
Gorman, J.A. (1969). “Alternative Measures of the Real Output and Productivity of Commercial Banks.” In V.R. Fuchs (ed.), Production and Productivity in the Service Industries. New York: Columbia University Press, pp. 155–199.
Gotlieb, C.C. (1985). The Economics of Computers: Costs, Benefits, Policies, and Strategies. Englewood Cliffs, NJ: Prentice-Hall.
Greene, W.H. (1983). “Simultaneous Estimation of Factor Substitution, Economies of Scale, Productivity, and Non-Neutral Technical Change.” In Developments in the Econometric Analysis of Productivity. Boston: Kluwer, pp. 121–144.
Hoos, I.R. (1982). “Statement of Concern.” In Office Technology and People, Vol. 1. Amsterdam: Elsevier Scientific, p. 30.
Lawrence, C., and R.P. Shay. (1986). “Technology and Financial Intermediation in Multi-product Banking Firms: An Econometric Study of U.S. Banks, 1979–1982.” Technological Innovation, Regulation, and the Monetary Economy 1986, 53–92.
Marimont, M.L. (1969). “Measuring Real Output for Industries Providing Services: OBE Concepts and Methods.” In V.R. Fuchs (ed.), Production and Productivity in the Service Industries. New York: Columbia University Press, pp. 15–52.
McQueen, D.L., and J.R. Savary. (1977). “Economic Significance of the Computerization of Deposit-Taking Institutions in Canada.” Economic Council of Canada, Discussion Paper No. 87.
Parsons, D. (1990). “Information Technology and Productivity in Canadian Banking.” Ph.D. thesis, Computer Science Department, University of Toronto, Toronto.
Sickles, R.C. (1985). “A Nonlinear Multivariate Error Components Analysis of Technology and Specific Factor Productivity Growth with an Application to the U.S. Airlines.” Journal of Econometrics No. 27, 61–78.
Touche, Ross. (1984). The Impact of Techology on the Canadian Banking Industry. Touche Ross Management Consultants.
Triplett, J.E. (1990). “Two Views on Computer Prices.” Discussion Paper No. 45, Bureau of Economic Analysis, U.S. Department of Commerce, Washington, DC.
Yap, C.S., and G. Walsham. (1986). “A Survey of Information Technology in the U.K. Service Sector.” Information & Management 10, 267–274
Author information
Authors and Affiliations
Editor information
Rights and permissions
Copyright information
© 1993 Springer Science+Business Media New York
About this chapter
Cite this chapter
Parsons, D., Gotlieb, C.C., Denny, M. (1993). Productivity and Computers in Canadian Banking. In: Griliches, Z., Mairesse, J. (eds) Productivity Issues in Services at the Micro Level. Springer, Dordrecht. https://doi.org/10.1007/978-94-011-2200-9_7
Download citation
DOI: https://doi.org/10.1007/978-94-011-2200-9_7
Publisher Name: Springer, Dordrecht
Print ISBN: 978-94-010-4975-7
Online ISBN: 978-94-011-2200-9
eBook Packages: Springer Book Archive