We make an extensive simulation analysis in order to investigate the consequences of ignoring the potentially complex and data dependent effects of allocative inefficiency on the estimation of stochastic frontier panel data models. Generally system estimators perform worse than single equation...

We estimate the time-varying average efficiencies of the US banks during 1984–1995 with four different efficiency estimators. Using these four series of efficiency estimates, we make a multivariate Kalman filter analysis to examine the efficiency trend in US banks during this period.

“The quiet life hypothesis” (QLH) by Hicks (1935) argues that, due to management’s subjective cost of reaching optimal profits, firms use their market power to allow inefficient allocation of resources. Increasing competitive pressure is therefore likely to force management to work harder...