Risk and Regulation: The Efficiency of Italian Cooperative Banks

In this paper we analyse the determination of cost efficiency in a sample of Italian small banks located in different geographical areas and including two great institutional categories: cooperative banks (CB’s) and other banks. We highlight the effect of environmental factors (asset quality, local GDP per capita) on banks’ performance, and provide novel evidence in favour of the “bad luck” hypothesis suggested by Berger and De Young (Journal of Banking and Finance, 1997). Local GDP per capita strongly affects the territorial differentials for technical efficiency, especially for CB’s. This can be easily rationalised, as current regulations hamper CB’s vis-à-vis other banks in their capability to diversify territorially. Our estimates provide us with a tentative quantitative measure of the costs of missing diversification, ranging between 2 and 7 percentage points. Correspondingly, our evidence suggests that there is potentially strong endogeneity in some currently available bank performance indicators.Cooperative banks, Cost efficiency, Local shocks, Territorial diversification

Risk, regulation and performance in banking: theory and estimates for italian banks

2010 - 2011“The financial system ... may be simultaneously growth-induced and growth-inducing, but what really matter are the character of its services and the efficiency with which it provides them (Cameron et al. (1967), p. 2)”. In the literature, many studies have analyzed the impact of the financial sector on growth and economic development. This literature often lacks, however, an accurate assessment of the feed-back of growth on the financial sector. Indeed, empirical evidence suggests that environment is important in determining the efficiency of banks. Potential differences in the environmental, risk and regulation conditions of financial institutions have led many researchers to examine the impact of environment on financial development. Seldom this has been reflected upon the studies considering the finance-growth nexus The present work is addressed to this void of literature, investigating the impact of variables related to local growth and riskiness upon the development of financial sector, as captured by the qualitative proxy of bank efficiency. The latter concept, and its measurement, provides the thread of this thesis. In Chapter 1 we provide a survey of the main models used in literature to estimate productive efficiency, with some emphasis on the analysis of banking. We analyze the parametric and non-parametric frontier models, their estimation problems and main differences, also considering some recent contributions in this context. Devoting particular care to the analysis of productive processes within banking, we highlight the importance in this field of the multi-input multi-output nature of this production, the relevance of risk aversion, credit risk, and of environmental factors. In Chapter 2, we test the nexus between financial development and economic growth relying upon territorially disaggregated data (NUTS3 and SLL) from Italy. We use cost and profit efficiency measures, computed through a parametric approach (SFA), as qualitative measures of financial development, and credit volume divided by gross domestic product as its quantitative measure. A key element of novelty of this chapter's analysis is the interaction between banking and national accounting at a territorially very disaggregated level. The banking data, taken from the BilBank 2000 database distributed by ABI (Associazione Bancaria Italiana) over the 1998-2005 and 1998-2008 period, include many cooperative banks that operate at a purely local level. A growth model, similar to Hasan et al (2009), is specified and tested in a panel data context. Our estimates suggest that financial development has a positive significant impact on GDP per capita. In Chapter 3 we analyze the determination of cost efficiency in a sample of Italian small banks located in different geographical areas and including two great institutional categories: cooperative banks (CB’s) and other banks. We highlight the effect of environmental factors (asset quality, local GDP per capita) on banks’ performance, and provide novel evidence in favour of the “bad luck” hypothesis suggested by Berger and De Young (1997). Local GDP per capita strongly affects the territorial differentials for technical efficiency, especially for CB’s. This can be easily rationalized, as current regulations hamper CB’s vis-à-vis other banks in their capability to diversify territorially. Our estimates provide us with a tentative quantitative measure of the costs of missing diversification, ranging between 2 and 7 percentage points. Correspondingly, our evidence suggests that there is potentially strong endogeneity in some currently available bank performance indicators. [edited by author]X n.s

Weight status and mental health in Italy: Evidence from EHIS2 microdata

This paper tested the association between weight status (proxied by BMI) and mental health in Italy, using EHIS2 microdata, which provide the usual information(demographic, socio-economic, etc.), and also information on weight/height, and eight mental health variables (low interest, depression, sleep disorders, tiredness, eating disorders, sense of failure, low concentration, slow moving/speaking). The empirical results show that there is a strong positive association between weight status and all mental health variables (except of slow moving/slow speaking) with an interesting gender difference in the association between weight status and sleep disorders and eating disorders in that females suffer more than males. Moreover, the empirical results reveal that between weight status there is: a negative association with a high level of education, a high source of income and a high type of dwelling; a positive association with the marital status, a poor social network to count on in case of difficulty and a high degree of urbanization. Finally, the empirical findings sustain that a) there is a positive association between weight status and health variables (chronic anxiety and chronic diseases) and b) the association between weight status and the living area is negative when Northern italian regions are taken into account. The positive association between weight status and new emerging types of mental health problems such as sleep disturbances and eating disturbances suggests some considerations on the higher economic costs, at individual and social level, because of these new mental health problems associated to weight status. Moreover, the negative association between weight status and a high level of education suggests that educational policies could help individuals to raise barriers against obesity and sleep/eating disturbances associated to it

Investigating the impact of national income on environmental pollution. International evidence

This paper analyses how national income (per capita real GDP) influences the environmental pollution (per capita CO2 emissions) using a very heterogenous sample composed by 120 countries during the 2000-2009 period. We firstly apply a panel unit root test suggested by Im et al. (2003) in order to examine the stationarity properties of CO2 emissions and GDP and then a two-step Generalized Method of Moments (GMM) estimator, paying particular attention to the non-linearity of the national income-environmental pollution relationship, to investigate the existence of a Kuznets curve for CO2 emissions. Preliminary evidence showing the existence of an inverted U-shaped relationship between national income and environmental pollution, validating the Kutznes’s hypothesis, turned out to be measleading once the issue of (non) stationarity has been taken into account. Results also show that as population and industrial output expand, more pressure will be put forth the environment, leading to more emissions, calling for more strict environmental and energy conservation policies

On the relationship between bank market concentration and stability of financial institutions: Evidence from the Italian banking sector

This paper explores the relationship between bank market concentration and financial stability of financial institutions relying on highly territorially disaggregated data taken at municipality level in Italy between 2001 and 2012. Firstly, we test the existence of a U-shaped relationship between market concentration and financial stability. Secondly, we estimate the impact of the level of concentration of the banking system and other explanatory variables, such as size, level of capitalization and credit insolvency of financial institutions, on a proxy of risk taking behavior such as the banking ‘‘stability inefficiency’’ derived simultaneously from the estimation of a stability stochastic frontier. The paper concludes that the inefficiency of financial stability is U-shaped relationship with respect to the measure of market concentration. Boosting market power increases bank failure in very concentrated markets while leads to higher financial stability in already competitive markets. Bank size is an essential factor in explaining this relationship as the effect of size on the inefficiency of stability is an inverse U-shaped as a function of the market share indicator; results also suggest that high, low and average concentration levels do not change the positive effects that the level of capitalization has on the stability inefficiency

Regional innovation system (in)efficiency and its determinants: an empirical evidence from Italian regions

This paper investigates the regional innovation system (RIS) efficiency, and its determinants, in Italy through a Stochastic Frontier Analysis and using the concept of a knowledge production function. The contribution of universities’, private and public sectors’ resources devoted to research and development (R&D), in generating innovation, has been examined, as well as the impact of several exogenous environmental variables on RIS efficiency. The empirical findings suggest the importance of R&D investments taking place in the universities and in the private sector, which benefit the most to regional innovation activities; labour market and industries’ characteristics are found to have an important role on RIS efficiency

“The determinants of students' achievement: a difference between OECD and not OECD countries”

This paper investigates on the determinants of school performance measured by the average value of students’ tests score (math, reading and science) at school level. PISA data from 2000 to 2012 are used in order to explore this relationship. A multivariate regression is assessed considering the different channels (funds, computers connected to internet, parental education, student teacher ratio, number of girls and ownership) and controlling for time and country fixed effects. The analysis is done both allowing for the total sample and grouping for OECD countries and NO-OECD countries. The most important results show that, considering the all sample and the only OECD countries, school performances are positively driven by the student fees, presence of girls and computers; also the mother’s education plays an important role, while the father’s one is notable only at high level, otherwise is negative. Moreover, differently from that the improvement of the student achievement in NO-OECD countries is encouraged from charity funds, the presence of girls, and the parent’s education level

Human capital development, knowledge spillovers and local growth: Is there a quality effect of university efficiency?

In this paper, we test whether economic growth depends on human capital development using data disaggregated at territorial level and propose the use of efficiency estimates, measured using a non-parametric technique, as an alternative quality measure of higher education institutions (HEIs). The nature of knowledge spillovers is also taken into account to examine the existence of geographically localized spillovers, from the presence of efficient universities, on local growth. Results show that the efficiency of universities has a positive and significant effect on GDP per worker. Moreover, we find evidence that productivity gains are larger in areas in which the most efficient universities are located, suggesting that investment in tertiary education may affect geographical distribution of economic activity as well as its level

“The determinants of students' achievement: a difference between OECD and not OECD countries”

This paper investigates on the determinants of school performance measured by the average value of students’ tests score (math, reading and science) at school level. PISA data from 2000 to 2012 are used in order to explore this relationship. A multivariate regression is assessed considering the different channels (funds, computers connected to internet, parental education, student teacher ratio, number of girls and ownership) and controlling for time and country fixed effects. The analysis is done both allowing for the total sample and grouping for OECD countries and NO-OECD countries. The most important results show that, considering the all sample and the only OECD countries, school performances are positively driven by the student fees, presence of girls and computers; also the mother’s education plays an important role, while the father’s one is notable only at high level, otherwise is negative. Moreover, differently from that the improvement of the student achievement in NO-OECD countries is encouraged from charity funds, the presence of girls, and the parent’s education level