Scandinavian Working Papers in Economics

Working Paper Series,
Sveriges Riksbank (Central Bank of Sweden)

No 296: The Importance of Reallocation for Productivity Growth: Evidence from European and US Banking

Jaap W.B. Bos () and Peter C. van Santen ()
Additional contact information
Jaap W.B. Bos: Maastricht University School of Business and Economics, Postal: P.O. Box 616, 6200 MD, Maastricht, The, Netherlands
Peter C. van Santen: Research Department, Central Bank of Sweden, Postal: Sveriges Riksbank, SE-103 37 Stockholm, Sweden

Abstract: To what extent has input reallocation contributed to aggregate productivity growth in the banking sectors of Europe and the United States? Interestingly, under-performing banks capture market share, while more productive banks lose market share, in particular in the US. The pattern of reallocation is markedly different between the geographical regions: European productivity has grown by reallocating inputs through the first half of the sample period, at the same time when reallocation diminished growth in the US. The long-run positive effects of creative destruction are especially apparent in the US, where reallocation is an important driver of increases in productivity.

Keywords: reallocation; productivity growth; efficiency; banking

JEL-codes: C24; D24; O30; O47

40 pages, February 1, 2015

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