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ASSESSING OUTPUT AND PRODUCTIVITY GROWTH IN THE BANKING INDUSTRY

                                                           Panayiotis P. Athanasoglou
                                                                    Bank of Greece

                                                                Evangelia A. Georgiou
                                                                    Bank of Greece

                                                                Christos C. Staikouras
                                                Athens University of Economics and Business

ABSTRACT

This paper assesses the evolution of output and productivity in the Greek banking industry for the period 1990-2006. Three main categories of bank output were estimated based on modern theoretical approaches, while for the aggregation and estimation of output and inputs and the estimation of productivity (partial and total factor) we relied on the index number method (Tornqvist index). Additionally, we considered the effect of labor quality on banks’ productivity and using a growth accounting framework we examined the contribution of total factor productivity (TFP) to bank output growth. The results show that bank output and labor productivity increased considerably during the period under examination, outpacing the respective GDP growth and labor productivity of the Greek economy. Capital productivity and TFP of the Greek banking industry have also improved remarkably mainly since 1999, as a result of the structural changes that took place within the industry, capital investments (mainly in IT equipment) as well as improvement in the quality of human capital.

Keywords: Bank output; user-cost approach; total factor productivity; Tornqvist index; growth accounting; labor quality


JEL classification: D24, G21, J24, O47

Acknowledgements: The authors would like to thank I. Papadakis and H. Gibson for very helpful comments and D. Ananiadi for her assistance with research. The views expressed in this paper do not necessarily reflect those of the Bank of Greece.

Correspondence:

Panayiotis P. Athanasoglou
Economic Research Department
Bank of Greece, 21 E. Venizelos Ave.,
102 50, Athens, Greece
Tel.: +30210-320 2449
Email: pathanasoglou@bankofgreece.gr


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