This paper introduces a novel by-production approach to modeling desirable and undesirable output production processes in the US banking sector. We utilize the structural proxy variable framework in which desirable outputs (different types of loans and other income-generating activities) are exogenous, which is a common practice in the banking literature. The undesirable output is non-performing loans (NPLs). To address the endogeneity of variable inputs (purchased funds and core deposits) in the production of desirable outputs, we employ an input distance function and rely on the bank’s cost-minimizing behavioral assumption. We specify the undesirable output technology as a function of desirable outputs as well as other factors such as total non-transaction accounts, undivided profits, and capital reserves. Using US commercial bank data from 2001 to 2020, we find that bank productivity exhibits steady growth in desirable outputs. Banks prioritize reducing the overall productivity impact of NPLs post-crisis, shifting focus from pre-crisis service provision.

中文翻译：

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银行业的阴阳：对理想和不理想的产出进行建模


本文介绍了一种新的副生产方法来模拟美国银行业的理想和不良产出生产过程。我们利用结构代理变量框架，其中理想的产出（不同类型的贷款和其他创收活动）是外生的，这是银行文献中的常见做法。不良产出是不良贷款 （NPL）。为了解决可变投入（购买资金和核心存款）在产生理想产出中的内生性问题，我们采用了输入距离函数，并依赖于银行的成本最小化行为假设。我们将不良产出技术指定为理想产出以及其他因素（如总非交易账户、未分配利润和资本储备）的函数。使用 2001 年至 2020 年的美国商业银行数据，我们发现银行生产率在理想产出方面表现出稳步增长。银行优先考虑减少危机后不良贷款对整体生产力的影响，将重点从危机前的服务提供转移开来。