Is There a Single Frontier in a Single European Banking Market?
36 Pages Posted: 28 Dec 2006
Date Written: December 2006
This paper attempts to estimate comparable efficiency scores for European banks operating in the Single Market in the EU. Using a data set of more than 5000 large commercial banks from all major European banking markets over the period 1993-2004, the application of meta-frontiers enables us to assess the existence of a single and integrated European banking market. We find evidence in favor of a single European banking market characterized by cost and profit meta-frontiers. However, compared to the meta-frontier estimations, pooled frontier estimations tend to underestimate efficiency levels and correlate poorly with country-specific frontier efficiency ranks.
Keywords: X-efficiency, stochastic frontiers, banking, meta-frontiers, technology gap ratios
JEL Classification: G21, L11, L22, L23
Suggested Citation: Suggested Citation