ABSTRACT
Cost efficiency has been estimated in two ways. First, we estimate a country-specific translog cost frontier:
tc = β0 +β1w1 +β2w2 +β3y1 +β4y2 +β5y3 +β6z + 1 2 β7w
2 1 + (14.1)
β8w1w2 + 1 2 β9w
1 2 β10y
1 2 β13y
β14y2y3 + 1 2 β15y
1 2 β16z
2 +β17y1w1 +β18y1w2 +β19y2w1 +
β20y2w2 +β21y3w1 +β22y3w2 +β23y1z +β24y2z +β25y3z +
β26w1z +β27w2z +β28t + 1 2 β29t
2 +β30y1t +β31y2t +β32y3t +
β33w1t +β34w2t +β35zt + v +u
Second, we apply a so-called true fixed-effects frontier (Greene, 2005) to all banks in our sample, with country-specific fixed effects and (again) a translog specification.
