A Note on Productivity Change in European Co-operative Banks: The Luenberger Indicator Approach

earlier results of Casu et al (2004). In terms of productivity decomposition, it is clear that
technological change drives productivity change in the European co-operative banking
industry. Excluding the TECH score for Portugal, the mean score is 0.1723; the best
performing co-operative banks are in Finland, France, the Netherlands and Spain. The score is
positive for all sectors; this implies there was investment in new technologies (methodologies,
procedures and techniques) and in the commensurate skills upgrades related to this. Technical
efficiency change (EFFCH) matches technological change in explaining productivity growth
only in Italy and Spain: in these two countries, co-operative banks are catching-up with best
practice. However, the scores imply that German co-operative banks are moving further away
from best practice whilst in six co-operative banking sectors, the indicator is equal to zero.

Table 3: Productivity Changes in European Co-operative Banks (1996-2003)

Overall, we observe three combinations of technical efficiency change and
technological change. (i) In the first group, we find three countries where improvements in
technical efficiency co-exist with improvements in technological change: Portugal, Spain and
Italy. These are the best-performing European co-operative banks; improvements in technical
efficiency denote upgraded organizational factors associated with the use of inputs and
outputs, as well as the relationship between inputs and outputs. (ii) In the second group, we
find six countries in which nil technical efficiency change co-exists with improvements in
technological change: Austria, Belgium, Finland, France, Luxembourg and Netherlands.
These are the European banks which are always efficient. (iii) Finally in the third group, we
find one country in which improvements in technological change co-exist with deterioration

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