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Earlier studies of Turkish banking had three limitations: (i) excessive reliance on cost\u2010function frontier analyses, wherein volume of loans is a measure of banking output; (ii) pooling all banks or imposing ad hoc heterogeneity assumptions; and (iii) lack of a comprehensive panel data set for proper analysis of productivity and heterogeneity. We use an estimation\u2013classification procedure to find likelihood\u2010driven classification of bank technologies in an 11\u2010year panel. In addition, we augment traditional cost\u2010frontier analysis with a labour\u2010efficiency analysis. We conclude that state banks are not particularly inefficient overall, but that they do utilize labour inefficiently. This partially supports recent calls for privatization. We also conclude that special finance houses (or Islamic banks) utilize the same technology as conventional domestic banks, and do so relatively efficiently. This suggests that they do not cause harm to the financial system. Finally, we conclude that foreign banks utilize a different technology from domestic ones. This suggests that one should not overstate their value to the financial sector. Copyright \u00a9 2005 John Wiley &amp; Sons, Ltd.<\/jats:p>","DOI":"10.1002\/jae.835","type":"journal-article","created":{"date-parts":[[2005,7,27]],"date-time":"2005-07-27T16:14:12Z","timestamp":1122480852000},"page":"641-664","source":"Crossref","is-referenced-by-count":82,"title":["Inefficiency and heterogeneity in Turkish banking: 1990\u20132000"],"prefix":"10.1002","volume":"20","author":[{"given":"Mahmoud A.","family":"El\u2010Gamal","sequence":"first","affiliation":[],"role":[{"vocabulary":"crossref","role":"author"}]},{"given":"Hulusi","family":"Inanoglu","sequence":"additional","affiliation":[],"role":[{"vocabulary":"crossref","role":"author"}]}],"member":"311","published-online":{"date-parts":[[2005,7,27]]},"reference":[{"key":"e_1_2_8_2_1","first-page":"12","article-title":"Computation and inference in semiparametric efficient estimation","volume":"3","author":"Adams R","year":"1997","journal-title":"Advances in Computational Economics"},{"issue":"4","key":"e_1_2_8_3_1","first-page":"475","article-title":"A CAMEL\u2010wise comparative financial and market share analysis of the Islamic banks currently operating in Turkey","volume":"21","author":"Agaoglu E","year":"1994","journal-title":"Middle East Technical University Studies in Development"},{"key":"e_1_2_8_4_1","doi-asserted-by":"publisher","DOI":"10.2307\/2601094"},{"key":"e_1_2_8_5_1","doi-asserted-by":"publisher","DOI":"10.1016\/0304-4076(77)90052-5"},{"key":"e_1_2_8_6_1","doi-asserted-by":"publisher","DOI":"10.1142\/S0219024999000157"},{"key":"e_1_2_8_7_1","doi-asserted-by":"publisher","DOI":"10.2307\/2673929"},{"issue":"2","key":"e_1_2_8_8_1","first-page":"1","article-title":"Risk and profitability measures in Islamic banks: the case of two Sudanese banks","volume":"6","author":"Bashir A","year":"1999","journal-title":"Islamic Economic Studies"},{"key":"e_1_2_8_9_1","volume-title":"40th Year Book","author":"BAT","year":"1999"},{"issue":"1","key":"e_1_2_8_10_1","first-page":"149","article-title":"Frontier production functions, technical efficiency and panel data: with application to paddy farmers in India","volume":"3","author":"Battese G","year":"1992","journal-title":"Journal of Productivity Analysis"},{"key":"e_1_2_8_11_1","doi-asserted-by":"publisher","DOI":"10.1111\/j.1467-8489.1977.tb00204.x"},{"key":"e_1_2_8_12_1","doi-asserted-by":"publisher","DOI":"10.1007\/s001810000037"},{"key":"e_1_2_8_13_1","doi-asserted-by":"publisher","DOI":"10.1016\/S0377-2217(96)00342-6"},{"issue":"7","key":"e_1_2_8_14_1","doi-asserted-by":"crossref","first-page":"895","DOI":"10.1016\/S0378-4266(97)00010-1","article-title":"Inside the black box: what explains the differences in the efficiencies of financial institutions?","volume":"21","author":"Berger A","year":"1997","journal-title":"Journal of Banking and Finance"},{"key":"e_1_2_8_15_1","doi-asserted-by":"publisher","DOI":"10.1080\/000368400418989"},{"key":"e_1_2_8_16_1","unstructured":"BRSA.2001a.Towards a sound Turkish banking sector. 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