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

Subal Kumbhakar (), Almas Heshmati () and Lennart Hjalmarsson

No 411, SSE/EFI Working Paper Series in Economics and Finance from Stockholm School of Economics

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 incorporate firm- and time-specific adjustment parameter. A flexible (translog) labor requirement function is used to represent the desired level of labor-use. It is specified as a function of a vector of outputs and other firm-specific variables. Labor-use inefficiency is defined as the ratio of actual to desired level of employment. Productivity growth is defined in terms of a shift in the labor requirement function. Swedish banking data is used as an application of the above model.

Keywords: Productivity; Efficiency; Convergence; Labor-Use; Panel Data; Banking Industry (search for similar items in EconPapers)
JEL-codes: C23 C51 G21 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2000-11-08, Revised 2001-11
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Published in Journal of Productivity Analysis, 2002, pages 79-102.

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