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Semi-nonparametric spline modifications to the Cornwell–Schmidt–Sickles estimator: an analysis of US banking productivity

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  • Pavlos Almanidis
  • Giannis Karagiannis
  • Robin Sickles

Abstract

This paper modifies the Cornwell, Schmidt and Sickles [CSS (J Econom 46:185–200, 1990 )] time-varying specification of technical efficiency to allow for switching patterns in temporal changes, which may occur more than once during the sample period. For this purpose, we move from the (second-order) polynomial specification of the standard CSS to a spline function setup, while keeping CSS’s flexibility regarding the cross-sectional dimension. The spline function specification of the temporal pattern of technical efficiency can accommodate more than one turning point and thus can be non-monotonic. This allows the modeler to account for firm or individual efficiency gains that can occur relatively quickly, for example, changes related to regulation or policy changes, as well as those related to ownership/organization changes (e.g., merger or acquisitions). Copyright Springer-Verlag Berlin Heidelberg 2015

Suggested Citation

  • Pavlos Almanidis & Giannis Karagiannis & Robin Sickles, 2015. "Semi-nonparametric spline modifications to the Cornwell–Schmidt–Sickles estimator: an analysis of US banking productivity," Empirical Economics, Springer, vol. 48(1), pages 169-191, February.
    • Handle: RePEc:spr:empeco:v:48:y:2015:i:1:p:169-191
    DOI: 10.1007/s00181-014-0890-y
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    2. Robert McKeown, 2017. "Where Are The Economies Of Scale In Canadian Banking?," Working Paper 1380, Economics Department, Queen's University.

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    More about this item

    Keywords

    Cornwell–Schmidt–Sickles estimator; Time-varying efficiency; Spline functions; Semi-parametric estimation; C13; C21; C23; D24; G21;
    All these keywords.

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • 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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