Costs and efficiency in Botswana commercial banking

This paper uses cross-section and panel data econometric estimates to analyse costs and efficiency in commercial banking in Botswana over the 1991–1995 period. Cost function estimates in banking normally use cross section data which have been derived from one year. Such estimates may not fully control for differences in individual banks or branches which may lead to cost variances. The panel data technique captures the correlation between unobservable individual attributes and observable behavioural determinants, and provides different estimates from those obtained from the usual cross-section method. The cross-section methodology finds stable negative ray-scale economies (rse). In contrast, the panel method finds marginally positive rse estimates.