Research Discussion Papers, Bank of Finland
No 11/2002:
Total factor productivity growth in European stock exchanges: A non-parametric frontier approach
Heiko Schmiedel
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; (follow links to similar papers)
JEL-Codes: C23; D24; G29; O52; (follow links to similar papers)
41 pages, June 17, 2002
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