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Information Technology and Productivity Changes in the Banking Industry
Author(s) -
Casolaro Luca,
Gobbi Giorgio
Publication year - 2007
Publication title -
economic notes
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.274
H-Index - 19
eISSN - 1468-0300
pISSN - 0391-5026
DOI - 10.1111/j.1468-0300.2007.00178.x
Subject(s) - frontier , profit (economics) , productivity , economics , panel data , total factor productivity , banking industry , production–possibility frontier , information technology , investment (military) , capital (architecture) , technological change , monetary economics , business , finance , econometrics , macroeconomics , microeconomics , history , archaeology , politics , political science , law
This paper analyses the effects of investment in information technologies (IT) in the financial sector using micro‐data from a panel of 600 Italian banks over the period 1989–2000. Stochastic cost and profit functions are estimated allowing for individual banks’ displacements from the best practice frontier and for non‐neutral technological change. The results show that both cost and profit frontier shifts are strongly correlated with IT capital accumulation. Banks adopting IT capital‐intensive techniques are also more efficient. On the whole, over the past decade IT capital‐deepening contribution to total factor productivity growth of the Italian banking industry can be estimated in a range between 1.3 and 1.8 per cent per year.