Finn R. Førsund

Malmquist Indices of Productivity Growth during the Deregulation of Norwegian Banking, 1980-89

Productivity growth during the deregulation of the Norwegian banking industry is studied within the framework of data envelopment analysis, which explicitly allows for multiple outputs. Introducing Malmquist indices for productivity growth, total growth can be decomposed into frontier growth and change in each banks distance to the frontier. Both the total growth index and its components can be consistently chained over time. The authors find productivity regress at the average bank prior to the deregulation, but rapid growth when deregulation took place. Deregulation also led to less dispersion of productivity levels within the industry. Copyright 1992 by The editors of the Scandinavian Journal of Economics.

Banking efficiency in the Nordic countries

Abstract Evidence of the relative competitiveness of the banking industries in three Nordic countries is provided, by applying Data Envelopment Analysis of productivity on the national and the pooled data sets. The analysis produces a detailed account of how well banks from different countries and different sizes may be prepared to meet the more intense competition of a common European banking market.

SLACK-ADJUSTED EFFICIENCY MEASURES AND RANKING OF EFFICIENT UNITS

In non-parametric methods many units are calculated as efficient. The article suggests a method for ranking efficient units, not by their efficiency, but by importance as benchmarks for the inefficient units, in contrast to earlier suggestions in the literature which rank units high if they are specialized. However, the total potentials for improvement frequently remain unrevealed by calculating radial efficiency measures of the Farrell type only. The article therefore first develops efficiency measures that explicitly extend the radial measures to include slacks. The new measures are applied to a typical multidimensional small-sample data set for Norwegian employment offices.

Generalised Farrell Measures of Efficiency: An Application to Milk Processing in Swedish Dairy Plants

This paper is concerned with the measurement of productive efficiency. Farrells measures of efficiency are generalized to nonhomogeneous production functions. Several new measures of efficiency have been introduced and applied to the Swedish milk processing industry. The empirical analysis is based on a complete set of cross section- time series data for a period of la years of 28 individual plants producing a homogeneous product, pasteurized milk. Industrial structure and structural change are examined by both studying the shape of the efficiency distributions for the individual units and their changes through time. The aggregate performance of the sector is studied by the development of the different measures of structural efficiency.

On the Origins of Data Envelopment Analysis

The concept “Data Envelopment Analysis” (DEA) was introduced in the journal literature by the highly influential 1978 paper of Charnes, Cooper, and Rhodes. In the subsequent literature the development of research leading up to this paper tended to be forgotten. However, studying this diffusion of ideas may give valuable insights into research issues still unexplored and insight in the research process itself. A natural starting point is Farrells seminal 1957 paper on concepts of efficiency and their computation. The richness of ideas presented in Farrell is demonstrated by the fact that the developments in the following two decades were based on aspects and ideas there. The origins of the main developments are identified, and the connections to Charnes, Cooper, and Rhodes are explored.

Productivity development of Norwegian electricity distribution utilities

When regulating electricity distribution utilities, estimates of the past productivity improvement performance are very important for future requirements. A piecewise linear frontier technology, reflecting observed best practice, accommodating the multi-output nature of distribution utilities is specified. A Malmquist index and its components, shift in frontier technology and change in efficiency, have been calculated for the period 1983 to 1989. The main results are a positive productivity growth averaging nearly 2% per year, and that this is mainly due to frontier technology shift. Outliers are scrutinised, but do not influence results for non-outliers.

Technical efficiency of Norwegian banks: The non-parametric approach to efficiency measurement

The nonparametric frontier methodology is applied to a sample of banks, where output levels are measured either by the number of accounts and their average size, or by the total balances of the accounts. The efficiency rankings of individual banks are found to depend substantially on our choice of output metric, whereas the estimated size of potential productivity improvements in the banking sector are less affected. The results on economies of scale are also largely unchanged.

Good modelling of bad outputs: Pollution and multiple-output production

The materials balance principle points to the crucial role of material inputs in generating residuals in production processes. Pollution modelling must be of a multi-output nature. The most flexible transformation function in outputs and inputs used in textbooks is too general to make sense in pollution modelling. Specifying bads as if they are inputs, although may be defendable on a macro level as a reduced form, hides explicit considerations of various modification activities. Extending the non-parametric efficiency approach to cover bads as outputs, assuming weak disposability of the bads as the only change in the modelling of the technology, has serious weaknesses. A complete taxonomy of inputs as to the impact on both residuals and marketed products as joint outputs is derived, based on factorially determined multi-output production, thus providing information for choice of policy instruments.

Deterministic parametric and nonparametric estimation of efficiency in service production: A comparison☆

Abstract The purpose of this study is to analyse productive efficiency in about 400 local social insurance offices of the Swedish social insurance system for the period 1974–1984. The analysis is based on parametric and nonparametric deterministic frontiers. The general results are that the efficiency is around 0.8 and that the differences between the approaches are supprisingly small.

On the calculation of the scale elasticity in DEA models

An issue in the multiple-output case within the literature on piecewise linear frontier production functions has been how to determine the nature of the scale properties. It is shown that knowledge of scale efficiency does not permit calculation of scale elasticity or vice versa. For inefficient units there is a relationship between input-saving and output-increasing efficiency measures through the average value of the scale elasticity between the two different reference points on the frontier. A direct approach to determine the scale properties is to calculate the scale elasticity from the dual problem to the calculation of Farrell efficiency measures.