Showing papers in "Applied Economics in 2011"
TL;DR: This article examined the effects of zero trade on the estimation of the gravity model using both simulated and real data with a panel structure, which is different from the more conventional cross-sectional structure.
Abstract: This article examines the effects of zero trade on the estimation of the gravity model using both simulated and real data with a panel structure, which is different from the more conventional cross-sectional structure. We begin by showing that the usual log-linear estimation method can result in highly deceptive inference when some observations are zero. As an alternative approach, we suggest using the poisson fixed effects estimator. This approach eliminates the problems of zero trade, controls for heterogeneity across countries, and is shown to perform well in small samples.
365 citations
TL;DR: In this paper, a sectoral breakdown of money holdings shows that current excess liquidity conditions have been partly related to the acceleration of nonbank financial intermediaries' money demand, as well as to the accumulation of marketable instruments.
Abstract: The strong and prolonged deviation of money growth from its reference value since 2001 has caused concern among policy-makers about the upside risks to price stability from monetary developments. In this article we provide evidence that these risks might have been smaller until 2005 than regularly assumed. Three basic findings support this view. First, a sectoral breakdown of money holdings shows that current excess liquidity conditions have been partly related to the acceleration of nonbank financial intermediaries’ money demand, as well as to the accumulation of marketable instruments. Such increases are likely to be associated more to portfolio choices than to transaction motives. Second, evidence from balance sheet data on investment funds points to a general increase in the relative importance of this sector in the economy, rather than to a higher degree of liquidity of their asset positions, thus reflecting, to a large extent, a permanent change in the financial structure of the economy. Third, exce...
279 citations
TL;DR: In this article, Monte Carlo experiments were employed to evaluate the performance of a number of common panel data estimators when serial correlation and cross-sectional dependence are both present, and they found large differences in the performances of the respective estimators.
Abstract: This study employs Monte Carlo experiments to evaluate the performances of a number of common panel data estimators when serial correlation and cross-sectional dependence are both present. It focuses on fixed effects models with less than 100 cross-sectional units and between 10 and 25 time periods (such as are commonly employed in empirical growth studies). Estimator performance is compared on two dimensions: (i) root mean square error and (ii) accuracy of estimated confidence intervals. An innovation of our study is that our simulated panel data sets are designed to look like ‘real-world’ panel data. We find large differences in the performances of the respective estimators. Further, estimators that perform well on efficiency grounds may perform poorly when estimating confidence intervals and vice versa. Our experimental results form the basis for a set of estimator recommendations. These are applied to ‘out of sample’ simulated panel data sets and found to perform well.
274 citations
TL;DR: In this paper, a new measure of competition, the Boone indicator, is applied to the banking industry, which is able to measure competition of bank market segments such as the loan market, whereas many well-known measures of competition can consider the entire banking market.
Abstract: This paper is the first that applies a new measure of competition, the Boone indicator, to the banking industry. This approach is able to measure competition of bank market segments, such as the loan market, whereas many well-known measures of competition can consider the entire banking market only. A caveat of the Boone-indicator may be that it assumes that banks generally pass on at least part of their efficiency gains to their clients. Like most other model-based measures, this approach ignores differences in bank product quality and design, as well as the attractiveness of innovations. We measure competition on the lending markets in the five major euro countries as well as, for comparison, the UK, the US and Japan. Bearing the mentioned caveats in mind, our findings indicate that over the period 1994-2004 the US had the most competitive loan market, whereas overall loan markets in Germany and Spain were among the best competitive in the EU. The Netherlands occupied a more intermediate position, whereas in Italy competition declined significantly over time. The French, Japanese and UK loan markets were generally less competitive. Turning to competition among specific types of banks, commercial banks tend to be more competitive, particularly in Germany and the US, than savings and cooperative banks.
151 citations
TL;DR: In this article, the authors explored the properties of the size and growth rates distributions of French manufacturing firms at the aggregate and disaggregate levels, respectively, using an extensive dataset on French manufacturing companies.
Abstract: This work explores basic properties of the size and growth rates distributions of firms at the aggregate and disaggregate levels. Using an extensive dataset on French manufacturing firms, we investigate which properties of firm size distributions and growth dynamics characterize the aggregate dynamics and are, at the same time, robust under disaggregation. Our analysis is based on non-linear robust regression methods which have never been applied before to this kind of data. The growth rates distributions we observe are well described by a Subbotin distribution with a shape parameter significantly lower than 1, suggesting a noticeable departure from the Laplace behavior reported in previous works on Italian and US data. At the same time, the variance of growth rates depends negatively on size and the relationship does not seem to be linear, with larger firms possibly displaying lower variability in their growth dynamics. At the disaggregate level, we observe significant heterogeneity in the firm size distributions across sectors while the shape of the sectoral growth rates density displays a surprising degree of homogeneity.
147 citations
TL;DR: In this article, a new approach for allowing the easy imposition of monotonicity on outputs in this context is proposed, which is tested in the educational sector using Spanish student level data from the Programme for International Student Assessment (PISA) database.
Abstract: The technology set involved in the estimation of a multi-output production frontier theoretically implies monotonicity on outputs. This is because an efficient firm cannot reduce the vector of outputs holding the vector of inputs fixed while it still belongs to the frontier. In empirical studies dealing with the estimation of parametric distance functions, this hypothesis is often violated by observations with far from average characteristics. To overcome this limitation, we propose a new approach for allowing the easy imposition of monotonicity on outputs in this context. This methodology is tested in the educational sector using Spanish student level data from the Programme for International Student Assessment (PISA) database. The results indicate that a nonnegligible 8.33% of the production units break the monotonicity assumption. Furthermore, although there is no statistically significant difference in efficiency distribution by school ownership, our methodology helps to detect a slight worse mathemat...
144 citations
TL;DR: In this paper, the authors focus on business demography of Italian firms, using an original database, obtained by matching and merging to gain the intersection of three firm level datasets, which allows them to simultaneously consider the effect of size, technology, trade, FDIs and innovation on firms' survival probability.
Abstract: Firms’ survival is often seen as crucial for economic growth and competitiveness. This article focuses on business demography of Italian firms, using an original database, obtained by matching and merging to gain the intersection of three firm level datasets. This database allows us to simultaneously consider the effect of size, technology, trade, FDIs and innovation on firms’ survival probability. We show that size and technological level positively affect the likelihood of survival. Internationalized firms show higher failure risk: on average competition is stronger in international markets, forcing firms to be more efficient. However, large internationalized firms are more likely to ‘survive’. An Italian internationalized firm to be successful and to survive, should be high-tech, large and innovative.
138 citations
TL;DR: In this paper, the authors evaluate the ability of market participants to anticipate monetary policy decisions in 14 countries by looking at both the magnitude and volatility of changes in the money market rates and show that the days of policy meetings are special days for financial markets.
Abstract: We evaluate the ability of market participants to anticipate monetary policy decisions in 14 countries. First, by looking at both the magnitude and volatility of changes in the money market rates we show that the days of policy meetings are special days for financial markets. Second, we find that the predictability of Federal Reserve (FED), Bank of England and European Central Bank (ECB) is fully comparable. Finally, an econometric analysis of the ability of market participants to incorporate in the current short-term interest rates the expected policy changes shows that in the euro area (and in other countries) policy decisions are anticipated well in advance.
110 citations
TL;DR: In this article, ex ante measures of vulnerability are constructed from the Vietnam Household Living Standards Survey (VHLSS) data that cover the whole of Vietnam in 2002 and 2004, and compared with static indicators of poverty (i.e. the headcount ratio in a particular year).
Abstract: Drawing upon the Vietnam Household Living Standards Survey (VHLSS) data that cover the whole of Vietnam in 2002 and 2004, ex ante measures of vulnerability are constructed. These are then compared with static indicators of poverty (i.e. the headcount ratio in a particular year). Detailed analyses of the panel data show that (i) in general, vulnerability in 2002 translates into poverty in 2004; (ii) vulnerability of the poor tends to perpetuate their poverty and (iii) sections of the nonpoor but vulnerable slip into poverty. Durable reduction in poverty is conditional on (i) accurate identification of the vulnerable, (ii) their sources of vulnerability and (iii) design of social safety nets that would enable the vulnerable to reduce risks and cope better with rapid integration of markets with the larger global economy.
104 citations
TL;DR: In this paper, a dynamic bivariate probit model was used for the analysis and measurement of social exclusion and income poverty, controlling for unobserved heterogeneity and Wooldridge (2005)-type initial conditions.
Abstract: There is growing interest in the analysis and measurement of social exclusion, to complement the static and dynamic literature on income poverty. On theoretical grounds, social exclusion and income poverty are seen as different processes, but with closely interrelated dynamics. However, our empirical understanding of the way these two processes dynamically interact at the individual level is still very limited. To shed some light on the issue, we use a dynamic bivariate probit model, controlling for unobserved heterogeneity and Wooldridge (2005)-type initial conditions. Both the first- and second-order Markov dynamics are examined. We estimate the model using the Italian sample of the European Community Household Panel (ECHP), waves 1–8, and find a sizable extent of state dependence in both poverty and social exclusion. Moreover, there are dynamic cross-effects implying that poverty and social exclusion are mutually reinforcing. Social policies aimed at eradicating poverty and avoiding individuals’ social...
103 citations
TL;DR: No solid empirical evidence exists that population ageing is one of the principal determinants of healthcare expenditure, and factors such as technological progress, closeness to death and territorial decentralization of healthcare are increasingly seen as important in the development of explanatory models of Healthcare expenditure.
Abstract: This study reviews the literature on determinants of healthcare expenditure for the period 1998 to 2007. The methodology combines searches in the MesH database of PubMed with the search in the principal journals of Health Economics. 20 primary studies were found that met the criteria for inclusion. No single pattern of results is clearly identified. Among the 20 articles, four consider income to be the principal determinant of healthcare expenditure, two of them jointly with population ageing. Six highlight population ageing, as against six others that emphasize the proximity to death. The remaining six do not focus on a specific variable, or focus on another variable, e.g. technological progress or territorial decentralization. 11 of the 20 articles calculate the income elasticity of demand, only two of them obtaining a value greater than 1, thus cataloguing healthcare expenditure as a luxury good. There is, therefore, no unanimity in the variables and econometric regressions of healthcare expenditure in...
TL;DR: In this article, the authors analyse factors driving inter-and intra-firm diffusion of Information and Communication Technologies (ICT) using data from Irish manufacturing firms over the period 2001 to 2004.
Abstract: We analyse factors driving inter- and intra-firm diffusion of Information and Communication Technologies (ICT) using data from Irish manufacturing firms over the period 2001 to 2004. We find that the path of ICT diffusion has been uneven across firms, industries and space, which is consistent with the theory of new technology adoption. Our results suggest that firms that are larger, younger, fast growing, skill-intensive, export-intensive and firms located in the capital city region have been relatively more successful in adopting and using ICT. We find positive technology spillovers from firms that have adopted ICT located in the same industry and region.
TL;DR: In this article, the authors show that personal income has two main effects on happiness: the first is a positive effect which depends on individual's ranking within domestic income quintiles, and the second is determined by the relationship between income and relational goods.
Abstract: Our empirical analysis on the determinants of self-declared happiness on more than 100 000 individuals from representative samples in 82 world countries does not reject the hypothesis that the time spent for relationships has a significant and positive impact on happiness. This basic nexus helps to understand new unexplored paths in the so-called ‘happiness-income paradox’. To illustrate them we show that personal income has two main effects on happiness. The first is a positive effect which depends on individual's ranking within domestic income quintiles. The second is determined by the relationship between income and relational goods. In principle, more productive individuals may substitute (if the income effect prevails over the substitution effect) worked hours with the nonworking time made free for enjoying relationships, when they have strong preferences for them. The problem is that these individuals tend to have ties with their income class peers who share with them a high opportunity cost for the...
TL;DR: In this paper, the causal impact of terrorist attacks on the tourism industry in Turkey was investigated based on the Autoregressive Distributed Lag (ARDL) bounds testing procedure for the period between 1986 and 2006.
Abstract: This article aims at investigating the causal impact of terrorist attacks on the tourism industry in Turkey based on the Autoregressive Distributed Lag (ARDL) bounds testing procedure for the period between 1986 and 2006 The ARDL bounds test reveals that tourism is in a long-run equilibrium level relationship with terrorism The evidence obtained from the long-run and short-run parameter estimates indicates the existence of a negative causal effect of terrorism on tourism
TL;DR: In this paper, the authors examined the self-employment decision for disabled and nondisabled workers in the UK using the LFS data and found that self-employment may provide an important means by which those with work-limiting disabilities can accommodate their impairment.
Abstract: This article examines the self-employment decision for disabled and nondisabled workers in the UK. Using Labour Force Survey (LFS) data, it is found that self-employment may provide an important means by which those with work-limiting disabilities can accommodate their impairment.
TL;DR: In this paper, the authors apply real yield and weather data from Northeast Germany in order to quantify the risk-reducing effect that can be achieved in wheat production by using precipitation options.
Abstract: It is a matter of common knowledge that weather represents the major source of uncertainty in crop production. It is to be expected that weather fluctuations will increase in the future due to climate change. Traditionally, farmers tried to protect themselves against weather-related yield variations by buying insurances. More recently, there has been a discussion regarding the use of weather derivatives to safeguard against volumetric risks. Although weather derivatives display advantages over traditional insurances, there is only a relatively small market for these products in agriculture. This is partly attributed to the fact that it is unclear whether and to what extent weather derivatives are a useful instrument of risk management in agriculture. This study applies real yield and weather data from Northeast Germany in order to quantify the risk-reducing effect that can be achieved in wheat production by using precipitation options. To do so stochastic simulation is used. The hedging effectiveness is c...
TL;DR: In this paper, the authors used propensity score matching to investigate the effect of subsidies on the employment and unemployment rates of hard-to-place workers in Germany, and they showed that subsidies have a favorable effect on employment prospects of participants.
Abstract: Targeted wage subsidies paid to employers are an important element of active labour market policies in Germany. This article uses propensity score matching to investigate their effect on the employment and unemployment rates of subsidized hard-to-place workers. In a first scenario, we estimate the average treatment effect of a subsidy on previously unemployed individuals. A second scenario analyses the effects of a subsidy on employment probabilities conditional on taking-up employment. The third scenario investigates the additional effect of a subsidy on individuals, who have participated in a short-term training measure beforehand. Summing up and in line with the literature, the results show that subsidies have a favourable effect on the employment prospects of participants.
TL;DR: In this paper, the authors employed stochastic frontier analysis (SFA) to analyse Malaysian commercial banks during 1996-2002, and particularly focused on determining the impact of Islamic banking on performance.
Abstract: This study employs Stochastic Frontier Analysis (SFA) to analyse Malaysian commercial banks during 1996–2002, and particularly focuses on determining the impact of Islamic banking on performance. We derive both net and gross efficiency estimates, thereby demonstrating that differences in operating characteristics explain much of the difference in costs between Malaysian banks. We also decompose productivity change into efficiency, technical, and scale change using a generalized Malmquist productivity index. On average, Malaysian banks experience moderate scale economies and annual productivity change of 2.68%, with the latter driven primarily by Technical Change (TC), which has declined over time. Our gross efficiency estimates suggest that Islamic banking is associated with higher input requirements. However, our productivity estimates indicate that full-fledged Islamic banks have overcome some of these cost disadvantages with rapid TC, although this is not the case for conventional banks operating Islamic windows. Merged banks are found to have higher input usage and lower productivity change, suggesting that bank mergers have not contributed positively to bank performance. Finally, our results suggest that while the East Asian financial crisis had a short-term costreducing effect in 1998, the crisis triggered a long-lasting negative impact by increasing the volume of nonperforming loans.
TL;DR: In this paper, the role of income in the decision of participating in the tourism demand within one year is analyzed. But, the analysis is carried out to the regional level using a survey conducted in 15 European (EU-15) countries, and the analysis adds new variables to the outbound tourism demand modelling, such as the attributes of the place of residence.
Abstract: This article analyses the role of income in the decision of participating in the tourism demand within 1 year. The tourists who are participating can travel to domestic destinations only, abroad destinations only or to both of them. Such a substitution pattern is modelled using a bivariate probit model. The analysis is carried out to the regional level using a survey conducted in 15 European (EU-15) countries. In addition to the traditional socioeconomic variables, the analysis adds new variables to the outbound tourism demand modelling, such as the attributes of the place of residence. The results show that tourism demand is income elastic. However, there are marked differences in the income elasticities of the probabilities of travelling domestically or abroad. Above certain income threshold, the substitution pattern between destinations takes part. The probability of travelling domestically only remains constant, whereas the probability of travelling abroad keeps growing. Additionally, the article prov...
TL;DR: In this paper, the authors used the bounds test approach proposed by Pesaran et al. (2001) based on unrestricted error correction model (UECM) and Toda and Yamamoto's (1995) Granger noncausality tests.
Abstract: This study tests Wagner's law (the tendency for government activities to expand along with economic expansion) for Nigeria using annual time series data between 1970 and 2006. It adopts the bounds test approach proposed by Pesaran et al. (2001) based on unrestricted error correction model (UECM) and Toda and Yamamoto's (1995) Granger noncausality tests. Empirical results from the bounds test indicate that there exists no long-run relationship between government expenditure and output in Nigeria. In addition, Toda and Yamamoto's (1995) causality test results show that Wagner's law does not hold for more than the period being tested. Rather we found a weak empirical support in the proposition by Keynes that public expenditure is an exogenous factor and a policy instrument for increasing national income.
TL;DR: The authors compare standard approaches used to handle losses in logarithmic profit models with a simple novel approach, and discuss discriminatory power, rank stability and the precision of profit efficiency (PE) scores.
Abstract: In this article, we compare standard approaches used to handle losses in logarithmic profit models with a simple novel approach. We estimate translog stochastic profit frontiers, and discuss discriminatory power, rank stability and the precision of Profit Efficiency (PE) scores. Contrary to existing methods, our approach does not result in a loss of observations. Our new method enhances rank stability and discriminatory power, and improves the precision of PE scores.
TL;DR: Using the Autoregressive Distributed Lag (ARDL) approach and Pedroni panel estimation procedures that allow for heterogeneity, this paper found that exports and FDI have a significant impact on economic growth.
Abstract: The disappointing economic performance of Sub-Saharan African (SSA) economies in the late 1980s prompted reforms in foreign trade and Foreign Direct Investment (FDI) in the early 1990s. Using the Autoregressive Distributed Lag (ARDL) approach and Pedroni panel estimation procedures that allow for heterogeneity, this study found that exports and FDI have a significant impact on economic growth. Granger-type causality tests show the interrelatedness of exports, FDI, imports and income variables. The results also provide evidence of a two-stage causal chain of exports, imports and income. This article calls for more market-oriented policy reforms in SSA countries.
TL;DR: In this article, the impact of democracy on environmental conditions in a large sample of developing countries for the period 1976-2003 was examined empirically using three indicators of environmental quality: carbon dioxide emissions, water pollution and deforestation damage.
Abstract: This article examines the impact of democracy on environmental conditions in a large sample of developing countries for the period 1976–2003. This relationship is explored empirically using three indicators of environmental quality: carbon dioxide emissions, water pollution and deforestation damage. We find evidence that democracy is conducive to environmental improvement but that this result depends on the measure of the environmental quality that is used. We also find remarkable differences in results across our different sub-samples. The conclusion therefore is that there is no uniform relationship between democracy and the state of the environment.
TL;DR: In this article, a Markov Chain Monte Carlo (MCMCMC) method is used to compute the Bayes estimator of the regimes and parameters of the model and the approach is illustrated on simulated data and with returns from the New York Stock Exchange.
Abstract: Regime switching models, especially Markov Switching (MS) models, are regarded as a promising way to capture nonlinearities in time series. Combining the elements of MS models with full Autoregressive Moving Average–Generalized Autoregressive Conditional Heteroskedasticity (ARMA–GARCH) models poses severe difficulties for the computation of parameter estimators. Existing methods can become completely unfeasible due to the full path dependence of such models. In this article, we demonstrate how to overcome this problem. We formulate a full MS–ARMA–GARCH model and its Bayes estimator. This facilitates the use of Markov Chain Monte Carlo methods and allows us to develop an algorithm to compute the Bayes estimator of the regimes and parameters of our model. The approach is illustrated on simulated data and with returns from the New York Stock Exchange (NYSE). Our model is then compared to other approaches and clearly proves to be advantageous.
TL;DR: In this paper, stated preferences of a sample of the general public were used to estimate the shape of the SWF in the domain of health benefits, and the results suggest that it is possible to determine the parameters in a social welfare function from stated preference data, but that people are sensitive to what inequalities exist and to the groups across which those inequalities exist.
Abstract: One way in which economists might determine how best to balance the competing objectives of efficiency and equity is to specify a social welfare function (SWF). This paper looks at how the stated preferences of a sample of the general public can be used to estimate the shape of the SWF in the domain of health benefits. The results suggest that it is possible to determine the parameters in a social welfare function from stated preference data, but show that people are sensitive to what inequalities exist and to the groups across which those inequalities exist.
TL;DR: In this article, the authors provide new evidence on the linkages between various forms of market regulation and joblessness and its components, unemployment and inactivity, using a dynamic fixed effect model with an interaction term.
Abstract: This article provides new evidence on the linkages between various forms of market regulation and joblessness and its components, unemployment and inactivity. One crucial contribution of this article is the analysis of the interdependence across Product Market Regulation (PMR) and labour markets regulation (Employment Protection Legislation (EPL)). With the help of a dynamic fixed effect model with an interaction term, we estimate the marginal impact of EPL and PMR at different levels of the other interacted variable. To cope with problems related to the inclusion of time-invariant institutional variables in fixed effect models, we present results of regressions based on a new procedure, specifically designed to treat slowly changing variables. We build time-series data to account for the annual evolution of EPL, and use new data for unemployment insurance net replacement rates. Among other results, we find evidence of a positive (negative) effect of EPL (PMR) on employment performance as well as of subst...
TL;DR: In this article, the authors analyse the deficits of the German Lander (regional states) for the period 1960 to 2005 and test a number of hypotheses derived from the literature on the political economy of public deficits.
Abstract: We analyse the deficits of the German Lander (regional states) for the period 1960 to 2005 and test a number of hypotheses derived from the literature on the political economy of public deficits We find evidence for the weak government hypothesis, that is, coalition governments issue significantly more debt than single party governments – a result that is typically explained by the common pool problem As our data suggest, this result crucially hinges on the position or strength of the finance minister within coalition governments We find that coalition governments with a strong finance minister are – in terms of borrowing – not significantly different from single party governments In addition, we find (weak) evidence for an opportunistic political business cycle As borrowing is significantly lower in pre-election years it appears that German voters favour fiscal discipline There is no evidence for partisan behaviour, so party ideology seems to play a negligible role
TL;DR: It is suggested that fiscal decentralization of health services in Canada has had a positive and substantial influence on the effectiveness of public policy in improving a population's health over the period studied.
Abstract: This article contributes to the limited empirical literature on the impact of decentralization on economic welfare by investigating the hypothesis that shifts towards more fiscal decentralization in health services would be accompanied by improvements in population health. Building on a conventional public finance model applied to health care, this hypothesis is tested on a panel data of the highly decentralized Canadian provinces during the period 1979 to 1995. The results of the exploratory empirical analysis presented in this article suggest that fiscal decentralization of health services in Canada has had a positive and substantial influence on the effectiveness of public policy in improving a population's health over the period studied.
TL;DR: In this paper, the impact of different levels of subnational autonomy on economic growth was investigated and it was found that federal systems tend to have lower growth rates than do unitary states, independent of their degree of decentr...
Abstract: What impact, if any, does Fiscal Decentralization (FD) have on economic growth? Further investigations of the inter-relationships between FD and economic growth are timely given that government decentralization remains at the forefront of many Organization for Economic Cooperation and Development (OECD) policy agendas. This study incorporates a range of measures of FD to better account for the direct impact of different levels of subnational fiscal autonomy on economic growth. The analysis also considers the impact of previously omitted public sector decentralization variables that provide further indication of the extent to which Subnational Governments (SNG) are ‘closer to the people’ and potentially better able to account for local preferences in fiscal decision-making. Whilst little evidence of a direct relationship between FD and output growth is found, some evidence is found to suggest that federal systems tend to have lower growth rates than do unitary states, independent of their degree of decentr...
TL;DR: In this article, the authors adopt the two Data Envelopment Analysis (DEA) methods, including Banker-Charnes-Cooper (BCC) and Slacks-based Measure (SBM) super efficiency, to investigate whether a bank's technical efficiency index's results, incorporating account risk and not considering account risk, differ significantly.
Abstract: In this study we adopt the two Data Envelopment Analysis (DEA) methods, including Banker–Charnes–Cooper (BCC) and Slacks-based Measure (SBM) super efficiency, to investigate whether a bank's technical efficiency index's results, incorporating account risk and not incorporating account risk, differ significantly. The information is obtained from 43 Taiwanese banks for the period 1998 to 2002. We also employ the nonradial and slacks-based Malmquist Total Factor Productivity (TFP) index to measure the impact of productivity change on the panel data. Our empirical results from the DEA approach are summarized as follows: (1) Loan quality factors have an impact on a bank's efficiency. In general, the bank with a higher degree of problem loans drops down its efficiency by incorporating account risk; however, the bank with a lower degree of problem loans increases its efficiency by incorporating account risk. (2) Super efficiency provides a good framework for ranking efficient units. (3) Based on the nonradial an...