Does Input Substitutability in Banking Differ across Accession and Non-Accession Countries in Central and Eastern Europe?

This study extends previous research by comparing banks across European Union (EU) accession and non-accession countries of central-eastern Europe in order to detect differences that perhaps have implications related to policy prescriptions for joining the EU. Using commercial banking data from 17 c...

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Bibliographic Details
Published in:Journal of economic integration 2012, 27(1), , pp.195-205
Main Authors: Wu, Tong, Caudill, Steven B., Gropper, Daniel M., Hartarska, Valentina, Mixon, Franklin G.
Format: Article
Language:English
Subjects:
Bank assets
Bank capital
Bank loans
Banking industry
Banking reforms
Banking services
Banks
Commercial banks
Cost control
Cost efficiency
Cost functions
Data envelopment analysis
Econometrics
Efficiency
Market entry
Private banks
Transition economies
경제학
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Summary:This study extends previous research by comparing banks across European Union (EU) accession and non-accession countries of central-eastern Europe in order to detect differences that perhaps have implications related to policy prescriptions for joining the EU. Using commercial banking data from 17 centraleastern European countries for 2000-04, the period leading up to the EU accessions of 2004 and 2007, a multiproduct translog cost function approach reveals that banks in accession countries generally display stronger input substitutability across capital labor and deposits than that displayed by banks in non-accession countries. The implication regarding the higher substitutability between capital and labor in EU accession countries is lower banking industry employment in those countries after EU accession. Bank deposits are also substitutes for labor, reflecting the substantial impact of international competition and technological advancements in the industry. As a result of these relationships, pre-accession preparation for the forthcoming banking industry changes may be necessary in some instances.
ISSN:1225-651X
1976-5525
DOI:10.11130/jei.2012.27.1.195