Liberalization, bankers’ motivation and productivity: a simple model with an application

Luintel, K.B., Selim, S. and Bajracharya, P. 2017. Liberalization, bankers’ motivation and productivity: a simple model with an application. Economic Modelling. 61, pp. 102-112. https://doi.org/10.1016/j.econmod.2016.11.017

TitleLiberalization, bankers’ motivation and productivity: a simple model with an application
TypeJournal article
AuthorsLuintel, K.B., Selim, S. and Bajracharya, P.
Abstract

Proponents of financial liberalization argue that deregulation motivates bankers to increase their effort and operate at a higher level of efficiency and productivity. Sceptics, however, see that liberalization engenders economic instability and banking crises, and impedes growth. Bank efficiency and productivity, following liberalization, is extensively examined. Nonetheless, the core issue of bankers’ self-motivation remains implicitly assumed and unaddressed. Does liberalization self-motivate bankers and increase their efforts and productivity? This paper models bank productivity from this perspective and evaluates what proportion of banks’ total factor productivity is accounted for by the self-motivated productivity of bankers. We provide a micro-founded framework for the analyses of bankers’ optimal level of effort and effort-driven productivity. Our model also captures banks’ unit input-output prices, optimal wages, bank spread and the overall cost of bank services – measures that are important in evaluating reform policies. We assess the financial liberalization of Nepal as a test case and find that (i) bankers’ efforts and productivity have notably improved in Nepal, although banking services have become costly, and (ii) bank spread has moderately declined in recent years. Our approach is parametric which differs from DEA, hence complements the literature. We hope this analytical framework will be useful to evaluate reform episodes elsewhere.

JournalEconomic Modelling
Journal citation61, pp. 102-112
ISSN0264-9993
Year2017
PublisherElsevier
Accepted author manuscript
Digital Object Identifier (DOI)https://doi.org/10.1016/j.econmod.2016.11.017
Publication dates
Published in printFeb 2017
Published online22 Dec 2016
Published22 Dec 2016
LicenseCC BY-NC-ND 4.0

Related outputs

The impact of grain self-sufficiency regime on regional welfare and agricultural productivity in China
Selim, S. 2015. The impact of grain self-sufficiency regime on regional welfare and agricultural productivity in China. Agricultural Economics. 46, pp. 1-7. https://doi.org/10.1111/agec.12156

Reforms, incentives, welfare and productivity growth in Chinese wheat production
Patel, V. and Selim, S. 2014. Reforms, incentives, welfare and productivity growth in Chinese wheat production. Journal of Business and Policy Research. 9 (1), pp. 81-105. https://doi.org/10.21102/jbpr.2014.07.91.05

Labour productivity and rice production in Bangladesh: a stochastic frontier approach
Selim, S. 2012. Labour productivity and rice production in Bangladesh: a stochastic frontier approach. Applied Economics. 44 (5), pp. 641-652. https://doi.org/10.1080/00036846.2010.515203

Revisiting the capital tax ambiguity result
Selim, S. 2011. Revisiting the capital tax ambiguity result. Quantitative and Qualitative Analysis in Social Sciences. 5 (1), pp. 37-48.

Policy reforms and incentives in rice production in Bangladesh
Selim, S. and Parvin, N. 2010. Policy reforms and incentives in rice production in Bangladesh. Economics Bulletin. 30 (1), pp. 461-471.

Optimal taxation in a two sector economy with heterogeneous agents
Selim, S. 2010. Optimal taxation in a two sector economy with heterogeneous agents. Economics Bulletin. 30 (1), pp. 534-542.

Optimal Capital Income Taxation in a Two-Sector Economy
Selim, S. 2009. Optimal Capital Income Taxation in a Two-Sector Economy. in: Duffy, D. and Shinnick, E. (ed.) Public Goods, Public Policy and Taxation: A European Perspective Berlin LIT. pp. 179-198

On Policy Relevance of Ramsey Tax Rules
Selim, S. 2007. On Policy Relevance of Ramsey Tax Rules. Economics Discussion Papers. 2007 (31) 2007-31.

Permalink - https://westminsterresearch.westminster.ac.uk/item/9zw28/liberalization-bankers-motivation-and-productivity-a-simple-model-with-an-application


Share this

Usage statistics

129 total views
313 total downloads
These values cover views and downloads from WestminsterResearch and are for the period from September 2nd 2018, when this repository was created.