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A semiparametric stochastic input distance frontier model with application to the Indonesian banking industry

Author

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  • Kai Sun

    (School of Economics, Shanghai University)

  • Ruhul Salim

    (School of Economics and Finance, Curtin University)

Abstract

This paper proposes a semiparametric smooth-varying coefficient input distance frontier model with multiple outputs and multiple inputs, panel data, and determinants of technical inefficiency for the Indonesian banking industry during the period 2000 to 2015. The technology parameters are unknown functions of a set of environmental factors that shift the input distance frontier non-neutrally. The computationally simple constraint weighted bootstrapping method is employed to impose the regularity constraints on the distance function. As a by-product, total factor productivity (TFP) growth is estimated and decomposed into technical change, scale component, and efficiency change. The distance elasticities, marginal effects of the environmental factors on the distance elasticities, temporal behavior of technical efficiency, and also TFP growth and its components are investigated.

Suggested Citation

  • Kai Sun & Ruhul Salim, 2020. "A semiparametric stochastic input distance frontier model with application to the Indonesian banking industry," Journal of Productivity Analysis, Springer, vol. 54(2), pages 139-156, December.
    • Handle: RePEc:kap:jproda:v:54:y:2020:i:2:d:10.1007_s11123-020-00589-3
    DOI: 10.1007/s11123-020-00589-3
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    Keywords

    D24; G21;

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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