A productivity analysis of Eastern European banking taking into account risk decomposition and environmental variables

This paper develops a new Luenberger productivity which is applied to a technology where the desirable and undesirable outputs are jointly produced and are possibly negative. The components of this Luenberger productivity index - the efficiency change and the components of the technological shift - are then decomposed into factors determined by the technology, adjusted for ‘risk and environment’, ‘risk management’ and ‘environmental effects’. The method is applied to Central and Eastern European banks operating during 1998–2003 utilising three alternative input/output methodologies (intermediation, production and profit/revenue). Additionally, the comparative analysis of the sensitivity of the productivity indices in the choice of the methodologies is undertaken using statistical and kernel density tests. It is found that the main driver of productivity change in Central and Eastern European banks is technological improvement, which, in the beginning of the analysed period, hinged on the banks’ ability to capitalise on advanced technology and successfully take into account risk and environmental factors. Whereas, in the later sampled periods, we show that one of the most important factors of technological improvement/decline is risk management. Finally, the tests employed confirm previous findings, such as Pasiouras (2008) in this journal, that different input/output methodologies produce statistically different productivity results. Indeed, we also find that external factors, such as a risk in the economy and banking production, and a ‘corruption perception’ affect the productivity of banks

The use of 'performance radars' as a predictor of police force efficiency: an analysis of UK home office policy

Over the last 20 years, governments around the world have implemented strategies and targets to ensure that public services are efficient in the management of resources. In the UK this common agenda has led to the recent ‘Police Reform Act 2002’ in which consideration was given on how police forces can show ‘Value for Money’ based on government strategic policy targets. This paper discusses the ‘Performance Radar’ technique proposed by the Home Office in the United Kingdom as a new public policy objective in order to assess police force performance. We show, utilising an innovative nonparametric modelling strategy, that environmental factors and revenues can have significant effects on whether a police force is deemed to be efficient. Further, the results presents evidence that survey data should not be utilised as a basis to assess police performance

English and Welsh Police Force Efficiency: Demonstration Project Peer Review Results

The recent report by the Public Service Productivity Panel (PSPP) (2000), proposed that non-parametric (DEA) and parametric (SFA) modelling techniques be utilised as an aid to allow efficiency bandings of police forces. To determine whether these techniques could be utilised, a data set approved by the Home Office Steering Committee was compiled, and a report commissioned to present the results of the Demonstration Project (DP). This paper presents abridged results from a Peer Review report on the DP showing that the given data set could indeed produce efficiency bandings and hence facilitate future discussions concerning differential payments of funds to English and Welsh police forces. Due to the sensitivity of the results, the police force names have been changed

Economies of scale in UK building societies: a re-appraisal using an entry/exit model

This study advances an entry/exit model to analyse the scale efficiency of UK building societies. We find that there are considerable divergences across building societies in levels of scale efficiency and also in technological change during the sample period 1992-1997. The paper also finds that scale economies and technological change estimates are dependent on whether the econometrician balances a panel data set or utilises the entry/exit model based on Dionne et al’s (1998) specification. In general, scale economies in UK building societies are found to be more significant and more pervasive than in previous studies

The measure of English and Welsh police force efficiency: a comparison of distance function models

Since the Labour government came to power in 1997, it has introduced a regime whereby public services are accountable in respect of best value performance indicators (BVPIs). A recent Public Services Productivity Panel (PSP) (2000) report has developed a set of criteria whereby the economic analysis of police force efficiency by the Home Office is to be made standard. In this paper we utilise an innovative distance function strategy in contrast to the standard efficiency techniques (Data Envelopment Analysis and Stochastic cost Frontier Analysis) advocated in PSP (2000). We present results from four different distance function models; Data Envelopment Analysis; Free Disposal Hull; Super- Efficiency; and Stochastic Frontier Analysis; in order to assess police force efficiency during the sample period 1996 – 1999

Evaluating gains from mergers in a non-parametric public good model of police services.

The merger of police services in the UK has been suggested on the grounds that efficiency improvements will be possible. This paper applies a public good model of the police service to evaluate the potential efficiency gains from mergers of police services in England and Wales. We construct a dataset that reflects the public good nature of police service and allows for the exogenous imposition by Government of the level of police service budgets. Our main finding is that English and Welsh police force mergers could lead to increases in police staff resource efficiencies between 10% and 70%

An Economic evaluation of inputs and outputs in policing: problems in efficiency and measurement

The new Labour government has recently instigated an initiative to establish whether English and Welsh police forces should be ranked into groups based on an efficiency measure. The estimation techniques proposed in the Public Service Productivity Panel (2000) report in order to rank the efficiency of forces are Data Envelopment Analysis (DEA) and Stochastic Frontier Analysis (SFA). These procedures allow for multiple input/output configurations in a cost or production model in order to obtain efficiency scores. In order to produce comparative efficiency measures, however, it is essential that the services provided by police forces (the outputs or outcomes) be related to the resources (inputs) utilised by the forces in delivering these outputs (outcomes). A particular problem, however, is that policing includes many inputs and outputs (outcomes) that could potentially be utilised in an efficiency model using DEA and SFA. Hence, this paper considers the problems associated with measuring relative police force efficiency given that a vast number of potential indicators must be reduced to a handful to allow feasible estimation. In addition, it discusses the input and output variables utilised in the first 'official' analysis of English and Welsh police force efficiency (Demonstration Project (Home Office (2001))

The economics of managerialism and the drive for value for money in policing: best value performance indicators vs. efficiency rankings

The UK has recently proposed to develop a set of criteria whereby the economic analysis of police force efficiency is to be made standard. This follows a strategy of aiming for improvement through managerialism and Best Value Performance Indicators (BVPIs), similar to those implemented by US police forces after the Government Performance and Results Act 1993. In this paper we attempt to put this recent development of efficiency targeting into a UK historical/evolutionary context and discuss the economic methodologies and techniques behind creating best practice police reference sets. In addition, we present results from three techniques that have been advanced as tools to rank forces in the UK media and academic literature, and show how simple BVPI averaging can bias efficiency ranking of police forces

The Economics modelling of policing and the measurement of efficiency

A recent report (Public Service Productivity Panel (PSP) (2000)) has developed a set of criteria whereby the economic analysis of police force efficiency is to be made standard. An aim of the government’s drive for efficiency rankings is to enable the Home Office to determine a ‘best practice’ reference set of forces, and thereby allow differential funding of police forces. This paper attempts to put this recent development into a historical/evolutionary context and discusses: the economic methodologies behind creating best practice reference sets; the techniques proposed by the PSP (2000) report; and how best to estimate the production of police forces

Police efficiency in offences cleared: an analysis of English 'basic command units'

The job of policing covers a wide range of activities including, traditional crime detection and punishment, and the non-traditional aspects such as community meetings. However, the major focus of policing is on crime detection and prevention. This paper specifically considers these functions with respect to Basic Command Units (BCUs) or ‘precincts’, and determines their relative efficiency in this key area using DEA and the little used stochastic distance frontier. Relative Efficiency is measured in the context of a ‘pure production approach’ relating the incidence of various crimes (inputs) to the corresponding clear offences (outputs). This type of efficiency ranking can also help in further analysing best practice in order to reduce crime and the fear of crime in many police forces. The powerful non-linearity established in this relationship has important implications for police resourcing and funding as highlighted by Houpis et al (2001