Estimating Inefficiencies in Banking: A Survey

Abstract

This paper presents a review of the extensive literature concerned with estimating production and cost inefficiencies in banks. The meaning of inefficiency in this context is outlined, alternative estimation techniques are summarised and the problems of modelling the activities of banks and measuring their inputs and outputs are discussed. By including more non-US studies than previous surveys, the paper produces a more comprehensive summary and comparison of inefficiency results than has previously been attempted. The paper ends with a set of recommendations for future researchers in the area.