Productivity change in European banking: A comparison of parametric and non-parametric approaches

This paper compares parametric and non-parametric estimates of productivity change in European banking between 1994 and 2000. Productivity change has also been further decomposed into technological change, or change in best practice, and efficiency change. Both the parametric and non-parametric approaches consistently identify those systems that have benefited most (and least) from productivity change during the 1990s. The results also suggest that (where found) productivity growth has mainly been brought about by improvements in technological change and there does not appear to have been 'catch-up' by non-best-practice institutions. Competing methodologies sometimes identify conflicting findings for the sources of productivity for individual years. However, the two approaches generally do not yield markedly different results in terms of identifying the components of productivity growth in European banking during the 1990s. (C) 2003 Elsevier B.V. All rights reserved.