How Fast Do Banks Adjust? A Dynamic Model of Labor-Use with an Application to Swedish Banks

Subal Kumbhakar, Almas Heshmati () and Lennart Hjalmarsson

Journal of Productivity Analysis, 2002, vol. 18, issue 1, 79-102

Abstract: This paper deals with a dynamic adjustment process in which adjustment of a key variable input (labor) towards its desired level is modeled in a panel data context. The partial adjustment type model is extended to make the adjustment parameter both firm- and time-specific by specifying it as a function of firm- and time-specific variables. Desired level of labor use is represented by a labor requirement function, which is a function of outputs and other firm-specific variables. The catch-up factor is defined as the ratio of actual to desired level of employment. Productivity growth is then defined in terms of a shift in the desired level of labor use and the change in the catch-up factor. Swedish banking data is used as an application of the above model. Copyright Kluwer Academic Publishers 2002

Keywords: productivity; efficiency; catch-up factor; labor-requirement frontier; panel data (search for similar items in EconPapers)
Date: 2002
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DOI: 10.1023/A:1015756527109

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