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The Economic Research Institute, Stockholm School of Economics SSE/EFI Working Paper Series in Economics and Finance

No 411:
How Fast Do Banks Adjust? A Dynamic Model of Labor-Use with an Application to Swedish Banks

Subal C. Kumbhakar, Almas Heshmati () and Lennart Hjalmarsson

Abstract: This paper deals with a dynamic adjustment process in which adjustment of a key variable input (labor) towards its desired level is modeled in a panel data context. The partial adjustment type model is extended to incorporate firm- and time-specific adjustment parameter. A flexible (translog) labor requirement function is used to represent the desired level of labor-use. It is specified as a function of a vector of outputs and other firm-specific variables. Labor-use inefficiency is defined as the ratio of actual to desired level of employment. Productivity growth is defined in terms of a shift in the labor requirement function. Swedish banking data is used as an application of the above model.

Keywords: Productivity; Efficiency; Convergence; Labor-Use; Panel Data; Banking Industry; (follow links to similar papers)

JEL-Codes: C23; C51; G21; (follow links to similar papers)

27 pages, November 8, 2000, Revised November 2001

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This paper is published as:
Kumbhakar, Subal C., Almas Heshmati and Lennart Hjalmarsson, (2002), 'How Fast Do Banks Adjust? A Dynamic Model of Labor-Use with an Application to Swedish Banks', Journal of Productivity Analysis, Vol. 18, No. 1, pages 79-102



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