Technological progress, inefficiency, and productivity growth in the US securities industry, 1980–2000

Employing a Data Envelopment Analysis (DEA) approach, we investigate the technological progress, efficiency, and productivity of the US securities industry between 1980 and 2000. Our results indicate that the US securities industry in general is less efficient than the existing technology allows. The relative productivity of the US securities industry in general declined. The failure of most firms to catch up with the production frontier pushed forward by a few large investment banks is the major reason behind the declines of relative productivity. Smaller regional firms, due to their inability to respond to technological innovation, experienced especially large decreases in both efficiency and productivity.