Deregulation, Ownership, and Productivity Growth: Evidence from Indian Banks

Posted: 6 Oct 1999

See all articles by Subal C. Kumbhakar

Subal C. Kumbhakar

State University of New York (SUNY) at Binghamton - Department of Economics

Subrata Sarkar

Indira Gandhi Institute of Development Research (IGIDR)

Date Written: September 1999

Abstract

This paper analyzes the relationship between deregulation and productivity growth in the context of a mixed developing economy. A generalized shadow cost function approach is used to model the effects of regulation and measure total factor productivity growth. We use a panel of Indian private and public sector banks, observed during 1985-1996, to empirically examine the effect of deregulation on productivity. A disaggregated analysis is done for public and private banks to examine the presence of ownership effects. Our results indicate that significant decline in regulatory distortions and the anticipated increases in total factor productivity growth did not materialize in Indian banking following deregulation. While private sector banks improved their performance mainly due to the freedom to expand output, public sector banks did not respond well to the deregulation measures.

JEL Classification: G21, O16

Suggested Citation

Kumbhakar, Subal C. and Sarkar, Subrata, Deregulation, Ownership, and Productivity Growth: Evidence from Indian Banks (September 1999). Available at SSRN: https://ssrn.com/abstract=183388

Subal C. Kumbhakar

State University of New York (SUNY) at Binghamton - Department of Economics ( email )

Binghamton, NY 13902-6000
United States

Subrata Sarkar (Contact Author)

Indira Gandhi Institute of Development Research (IGIDR) ( email )

Gen A.K. Vaidya Marg Santoshnagar
Goregaon (East)
Bombay 400065, Maharashtra
India
(91)-(22)-840 0919 (Phone)
(91)-(22)-840 2752 (Fax)

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