Total Factor Productivity Growth in European Stock Exchanges: A Non-Parametric Frontier Approach

Bank of Finland Discussion Paper No. 11/2002

41 Pages Posted: 19 Nov 2002

See all articles by Heiko Schmiedel

Heiko Schmiedel

European Central Bank - Securities Settlement Systems Policy Division

Date Written: June 17, 2002

Abstract

This paper examines progressive changes in productivity of the European stock exchange industry using non-parametric frontier techniques. Within the framework of Malmquist indices, total factor productivity growth is decomposed into technological progress and technical efficiency change for a balanced panel of all major European stock exchanges over the period 1993-1999. The principal findings indicate an overall rise in productivity over the sample period, which is driven more by technological innovation than by efficiency improvements. According to organisational setup, technological innovation is more pronounced for exchanges with the following characteristics: automation, equity and derivatives trading, for-profit governance structure, large or medium-size capitalised markets. Technological progress can be interpreted as a sign of the dynamic nature of the whole exchange industry, in which stock exchanges take advantage of intense diffusion of new cost-effective technologies and information systems to leverage themselves onto a higher production frontier.

Keywords: stock exchanges, productivity, technological progress, Europe

JEL Classification: D24, G29, C23, O52

Suggested Citation

Schmiedel, Heiko, Total Factor Productivity Growth in European Stock Exchanges: A Non-Parametric Frontier Approach (June 17, 2002). Bank of Finland Discussion Paper No. 11/2002. Available at SSRN: https://ssrn.com/abstract=325480 or http://dx.doi.org/10.2139/ssrn.325480

Heiko Schmiedel (Contact Author)

European Central Bank - Securities Settlement Systems Policy Division ( email )

Directorate General Payment Systems
Kaiserstrasse 29
D-60311 Frankfurt am Main
Germany
+49-69 13 44 70 59 (Phone)
+49-69 13 44 60 00 (Fax)

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