Changes in economic regime and productivity growth: A study of Indian public sector banks

The total factor productivity (TFP) growth of Indian public sector commercial banks is examined using 23-year-long panel data. A multiple-output translog cost sq-stem, extended to accommodate both heteroskedasticity and autocorrelation, is used to measure TFP growth in the presence of quasi-fixed factors. TFP growth is further decomposed into three components, i.e., technological change, scale economies, and the effect of imperfect adjustment of quasi-fixed factors. The translog cost system is corrected for both heteroskedasticity and autocorrelation. On average, the banks achieved an annual TFP grow-th of 2%. During recent deregulation, the growth rate has improved to 7%. (C) 1997 Academic Press.