THE SOURCES OF PRODUCTIVITY CHANGE IN SPANISH BANKING

In this paper we examine the pattern of productivity change in Spanish banking over the period 1986-1993. Two sectors dominate Spanish banki ng, commercial banks and the faster-growing savings banks, We begin by examining productivity change separately within each sector. However since the two sectors are gradually becoming more competitive, we cont inue by merging the two sectors, and by examining productivity change in the industry. The merging procedure follows a methodology originall y proposed by Charnes, Cooper and Rhodes (1981), in which intra-sector al managerial inefficiency is eliminated prior to merging. This proced ure allows us to distinguish differences in managerial efficiency with in each sector from differences in the institutional efficiency of the two sectors. It also enables us to decompose potential productivity c hange into institutional efficiency change, technical change, and the impact of scale economies. We find the commercial banks to have had a slightly lower rate of productivity growth, but a slightly higher rate of potential productivity growth. We attribute this phenomenon to dif ferences in both managerial efficiency and institutional efficiency, t o differences in the rate of technical progress, and to the adverse im pact of diseconomies of scale in the commercial banking sector. (C) 19 97 Elsevier Science B.V.