EconPapers    
Economics at your fingertips  
 

Liberalization, bankers’ motivation and productivity: A simple model with an application

Kul B. Luintel, Sheikh Selim and Pushkar Bajracharya

Economic Modelling, 2017, vol. 61, issue C, 102-112

Abstract: Proponents of financial liberalization argue that deregulation motivates bankers to increase their effort and operate at a higher level of efficiency and productivity. Sceptics, however, see that liberalization engenders economic instability and banking crises, and impedes growth. Bank efficiency and productivity, following liberalization, is extensively examined. Nonetheless, the core issue of bankers’ self-motivation remains implicitly assumed and unaddressed. Does liberalization self-motivate bankers and increase their efforts and productivity? This paper models bank productivity from this perspective and evaluates what proportion of banks’ total factor productivity is accounted for by the self-motivated productivity of bankers. We provide a micro-founded framework for the analyses of bankers’ optimal level of effort and effort-driven productivity. Our model also captures banks’ unit input-output prices, optimal wages, bank spread and the overall cost of bank services – measures that are important in evaluating reform policies. We assess the financial liberalization of Nepal as a test case and find that (i) bankers’ efforts and productivity have notably improved in Nepal, although banking services have become costly, and (ii) bank spread has moderately declined in recent years. Our approach is parametric which differs from DEA, hence complements the literature. We hope this analytical framework will be useful to evaluate reform episodes elsewhere.

Keywords: G21; G28; O43; O53; Liberalization; Incentives; Productivity; Panel integration; Cointegration; Simulation (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0264999316307465
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:61:y:2017:i:c:p:102-112

Access Statistics for this article

Economic Modelling is currently edited by S. Hall and P. Pauly

More articles in Economic Modelling from Elsevier
Series data maintained by Dana Niculescu ().

 
Page updated 2017-09-29
Handle: RePEc:eee:ecmode:v:61:y:2017:i:c:p:102-112