Cross-country Panel Data Research Articles

The Impact of Natural Disasters on Income Inequality: Analysis using Panel Data during the Period 1970 to 2004

Although natural disasters have been found to influence economic growth, their impact on income inequality has not yet been explored. This paper uses cross-country panel data during the period 1965 to 2004 to examine how the occurrence of natural disasters has affected income inequality. The major findings of this study are that although natural disasters have increased income inequality in the short (5 years) term, this effect disappears in the long term (10 years). These findings are observed even after the fixed effects of year and country are controlled for.

Institutional development, transaction costs and economic growth: evidence from a cross-country investigation

Abstract:This paper seeks to quantify the impact of transaction costs on cross-country economic growth. Our evidence from a cross-country panel data regression analysis reveals a persistent and robust negative effect of increasing transaction costs on the path of economic growth. The growth-enhancing effects of lower transaction costs are confirmed after controlling for the set of conditioning variables and further demonstrated in a cross-country growth model calibration. The results provide evidence that transaction costs might indeed be central to the study of cross-country productivity differences, suggest the importance of contractual relations and indicate their significant impact on cross-country economic performance over time.

Proportionality Degree of Electoral Systems and Growth: A Panel Data Test

Abstract Previous empirical studies analysing the effect of electoral systems on growth lack unanimous answers as they miss-specify mixed systems in the empirical setting, that is, they neglect to consider the proportionality degree of electoral systems. This work supplies the missing answers by properly distinguishing the electoral rules using the Gallagher proportionality index. We estimate a non-linear relationship between the Gallagher proportionality index and the per capita GDP growth using cross-country panel data. Our findings show that the proportionality degree is significant for growth; mixed systems (characterized by an intermediate level of proportionality), combining the different advantages of both proportional and plurality systems, solve the problem of the accountability–responsiveness and the political–government instability trade-offs. As a consequence, they reach relatively higher growth rates with respect to more “extreme” electoral rules.

DETERMINANTS OF LABOR-INTENSIVE EXPORTS BY THE DEVELOPING COUNTRIES: A CROSS COUNTRY ANALYSIS

It is widely acknowledged that the export-oriented garment and textile industries have been playing important role on the overall economic development in developing countries. However, the performance of the developing countries in exporting garment and textiles is in fact, highly heterogeneous. While some of the developing countries such as, China, Vietnam and Bangladesh have been highly successful in exporting highly labor-intensive garment and textiles products, not all of the developing countries have been equally successful in doing so. Using cross-country panel data, an attempt has been made in this paper to ascertain the importance of infrastructure and business environment in explaining the heterogeneous performance in exporting garment and textiles by the developing countries. The paper empirically demonstrates that in addition to the availability of cheap labor, the availability of basic infrastructure, and a business friendly environment significantly affect the export of labor-intensive garment and textiles by the developing countries. The paper, thus, suggests to invest on infrastructure, and to develop a business friendly environment in developing countries to strongly link the growth potentials of labor-intensive products and economic growth.

Broadband penetration and economic growth nexus: evidence from cross-country panel data

This article investigates whether there are Granger causal relationships between broadband penetration, degree of urbanization, foreign direct investment and economic growth using a panel data set covering the G-20 countries for the period 1998–2011. Using our multivariate framework, we first find that all of the variables are cointegrated. Our findings further reveal a network of causal connections between the variables including short-run bidirectional causality between broadband penetration and economic growth among the more developed countries within the G-20. On the other hand, for the developing countries within the G-20, there is evidence of unidirectional causality from economic growth to broadband penetration.

Estimating the Relative Impacts of Health and Education on Economic Development in Southern Africa

This paper analysed the relative impacts of health and education on economic development in Southern Africa. A set of cross country panel data from 11 countries over the period 2005 - 2011 was used in the study. The econometric procedure adopted in the analysis followed the Breusch and Pagan Lagrangian Multiplier test and Hausman test techniques. Based on the Fixed Effects (FE) model, results show that health and education have significant positive effects on economic development; with health having a more remarkable effect on development in the region. The R-squared statistic indicates that nearly 21.79 percent total variation in economic development was accounted for by health and education during the period under review. The F(2,64) statistic (=15.45; p < 0.05) reveals significance of the model; while the interclass correlation value shows that nearly 99.53 percent of the variance was due to differences across panels.

The relationship of health aid to population health improvements.

International aid to the health sector is an important component of all health spending in many developing countries. The relationship between health aid and changes in population health among aid recipients remains unknown. To quantify the relationship between health aid and changes in life expectancy and mortality in children younger than 5 years (under-5 mortality) among aid recipient nations. Cross-country panel data analysis of the relationship between measures of health aid, life expectancy, and under-5 mortality. Using difference models for longitudinal data with fixed effects for countries and years, we estimated the unique relationship between health aid and changes in life expectancy and under-5 mortality, controlling for gross domestic product per capita, urbanization, and total fertility rate. A total of 140 aid-recipient countries between 1974 and 2010. Annual amount of development assistance directed to the health sector in constant 2010 US dollars. Improvements in under-5 mortality and life expectancy in the period following aid receipt. Between 1974 and 2010, each 1% increase in health aid was associated with 0.24 months greater increase in life expectancy (95% CI, 0.02-0.46) (P = .03) and a 0.14 per 1000 live births faster decline in the probability of under-5 deaths per 1000 live births (95% CI, 0.02-0.26) (P = .02). The association between health aid and health improvements has strengthened over time, with the closest association occurring between 2000 and 2010. Health improvements associated with health aid are measurable for 3 to 5 years after aid disbursement. These findings imply that an increase of $1 billion in health aid could be associated with 364,800 fewer under-5 deaths (95% CI, 98,400-630,000). International aid to the health sector is related to increasing life expectancy and declining under-5 mortality. The benefits from aid appear to last for several years and have been greatest between 2000 and 2010, possibly because of improving health technologies or effective targeting of aid.

Dynamic and Long-Term Linkages Among Growth, Inequality and Poverty in Developing Countries

Drawing upon a cross-country panel data for developing countries, the present study sheds new empirical light on dynamic and long-term linkages among growth, inequality and poverty. First, agricultural sector growth is found to be consistently the most important factor in reducing inequality and poverty not only through its direct effects but also through its indirect effects. Second, there is a significant and negative association between inequality and GDP per capita, with macro institutional quality as one of the important factors in determining the inequality-growth relationship. Third, policies designed to prevent conflicts and mitigate their disruptive effects and violence, stabilise commodity prices, and enhance institutional quality would help eliminate worst forms of deprivation. Our analysis points to a drastic shift away from rural-urban migration and urbanisation as main drivers of growth and elimination of extreme poverty, and towards revival of agriculture in the post-2015 policy discourse. Indeed, the case for urbanisation rests on not just shaky empirical foundations but could mislead policy makers and donors.

Within-Group Concentration, Between-Group Concentration, and the Winners and Losers of Digital Music Distribution

By lowering search costs, making more products available, and providing access to free content, information technology (IT) has changed patterns of market concentration in media industries such as recorded music. In this paper, I argue that to understand how IT has changed media markets we need to go beyond considering market concentration in terms of the distribution of sales by product, and also consider the distribution of sales by group of products: between-group concentration. With cross-country panel data, I show that IT had different effects on sales that depended strongly on the between-group concentration in each country at the time of the internet shock. I develop and test the hypothesis that the formal industry fared relatively better in markets with more between-group concentration than in markets with less. I conclude with a discussion of lessons and further questions implied by the results.

Information and capital flows revisited: The Internet as a determinant of transactions in financial assets

We extend Portes et al. (2001) by introducing the Internet as a variable, and we test the model empirically by using cross-country panel data on portfolio flows between the United States and other countries from 1990 to 2008. Asymmetric information accounts for the strong negative relationship between international asset transactions and distance. The Internet plays an important role in mitigating information asymmetry between countries and increases the volume of cross-border portfolio flows.

Information and Capital Flows Revisited: The Internet as a Determinant of Transactions in Financial Assets

This paper investigates the determinants of international transactions in financial assets empirically. We extend the gravity model in Portes et al. (2000) by introducing an internet variable. Using cross-country panel data on the portfolio flows between the US and other countries from 1990 to 2008, we found that the Internet turns out to mitigate the information asymmetries and thus increases cross-border portfolio flows between countries.

Is there the threshold effect of cigarette price on smoking prevalence? A cross-country panel data analysis

This article shows new cross-country evidences by empirically investigating the joint effects of cigarette price levels and joining the World Health Organization Framework Convention on Tobacco Control (WHO FCTC) on smoking prevalence in 74 countries over the period of 2000, 2003, 2005 and 2006. We assessed cigarette price elasticity for three national income levels using different databases on cigarette price from the Economist Intelligence Unit (EIU), demographic and socioeconomic country characteristics from the World Bank and adjusted smoking prevalence rates published by various yearly WHO reports on the global tobacco epidemic from 2000 to 2010. A panel threshold regression was used to capture the nonlinear effects that cigarette prices on smoking prevalence at the three national income levels endogenously determined by estimation. Our findings supported the evidence that joining the WHO FCTC would have a positive effect on reducing cross-country smoking prevalence, especially among countries with low- and medium-income levels. Moreover, some simulated results show that a price hike of 10% would reduce smoking prevalence in countries with national income levels equal to or less than US$1900 and by 7.2% in countries with national income levels between US$1900 and US$2510 more than those with national income levels that are higher than US$2510.

Job Satisfaction and Wages of Family Employees

Although they represent a sizable occupational group, little is known about family employees. Using utility theory and the theory of compensating wage differentials, we hypothesize that family employees have higher levels of job satisfaction and lower wages relative to regular employees. We present several regressions based on a large cross–country panel data set that support our hypotheses, and we discuss our study's implications for research on family businesses and the labor market.

The Causal Links between Aid and Government Expenditures

The most recent literature on aid effectiveness finds a positive effect of aid on growth. To the extent that aid goes through the budget, this either reflects an aid-financed increase in government expenditures (quantity effect) or an improvement in the use of government resources as a result of donor involvement and lower taxes (quality effect). This study investigates the causal link between on-budget aid and government expenditures using a large cross-country panel data set for 53 countries and recent methodology to test Granger causality in heterogeneous panels. I find that in most countries donors do not change aid in response to changes in the level of government expenditures and that recipient governments react to aid by changing the way they use their own resources rather than by increasing spending. Contrary to conventional wisdom, there is little support for a quantity effect: aid Granger causes government expenditures in only eight countries. This suggests that aid substitutes for domestic government revenue and that aid is effective largely through the quality effect.

Fiscal Policy and Crowding Out in Developing Asia

Fiscal stimulus programs have contributed substantially to developing Asia's faster and stronger-than-expected recovery from the global financial crisis. This may lead to political pressures for greater use of countercyclical fiscal policy in the postcrisis period. However, the countercyclical effectiveness of fiscal policy depends critically on the extent to which it crowds out private investment and consumption. In the medium term, the use of fiscal policy to promote rebalancing toward domestic demand may require a moderate fiscal expansion. The extent of crowding out will impinge upon the effectiveness of such fiscal expansion in boosting domestic demand. In this paper we perform empirical analysis on both cross-country panel data and country-specific time-series data to investigate crowding out in the region. Overall, our empirical evidence is decidedly mixed, with no clear evidence of either crowding out or crowding in. The evidence fails to provide compelling support for greater use of fiscal policy for countercyclical purposes. In the context of rebalancing, fiscal expansion will not, in and of itself, contribute to a more balanced demand and output structure. That would require using fiscal policy to help remove structural impediments to private consumption and investment.

Global Liquidity through the Lens of Monetary Aggregates

This paper examines how the financial activities of non-financial corporates (NFCs) in international markets potentially affects domestic monetary aggregates and financial conditions. Monetary aggregates reflect, in part, the activities of NFCs, who channel capital market financing into the domestic banking system, thereby influencing funding conditions and credit availability. Periods of capital inflows are also those when the domestic currency is appreciating, and such periods of rapid exchange rate appreciation coincide with increases in the central bank’s foreign exchange reserves, increasing the stock of narrow money. The paper examines economic significance of cross-country panel data on monetary aggregates and other measures of non-core bank liabilities. Non-core liabilities that reflect the activities of NFCs reflect broad credit conditions and predict global trade and growth.

Fertilizing Growth: Agricultural Inputs and Their Effects in Economic Development

This paper uses cross-country panel data to estimate the agronomic inputs that lead to cereal yield improvements and the consequences for developing countries' processes of structural change. The results suggest a clear role for fertilizer, modern seeds and water in boosting yields. It then estimates empirical links in developing economies between increased agricultural yields and economic growth; in particular, the spillover effect from yield growth to declines of labor share in agriculture and increases of non-agricultural value added per capita. The identification strategy for the effect of fertilizer includes a novel instrumental variable that exploits variation in global fertilizer price, interacted with the inverse distance between each country’s agriculturally weighted centroid and the nearest nitrogen fertilizer production facility. Results suggest that a half ton increase in staple yields (equal to the within-country standard deviation) generates a 13 to 20 percent higher GDP per capita, a 3.3 to 3.9 percentage point lower labor share in agriculture five years later, and approximately 20 percent higher non-agricultural value added per worker a decade later. The results suggest a strong role for agricultural productivity as a driver of structural change.

The Impact of Hurricane Strikes on Tourist Arrivals in the Caribbean

The authors quantify the impact of hurricane strikes on the tourism industry in the Caribbean. To this end they first derive a hurricane destruction index that allows them to calculate the actual wind speed experienced at any locality relative to the hurricane eye of a passing or land falling hurricane. They then employ this hurricane index in a cross-country panel data context to estimate its impact on country-level tourist numbers. The results suggest that an average hurricane strike causes tourism arrivals to be about 2% lower than they would have been had no strike occurred.

Poverty Reduction During the Rural–Urban Transformation – The Role of the Missing Middle

As countries develop, they restructure away from agriculture and urbanize. But structural transformation and urbanization patterns differ substantially, with some countries fostering migration out of agriculture into rural off farm activities and secondary towns, and others undergoing rapid agglomeration in mega cities. Using cross-country panel data for developing countries spanning 1980–2004, it is found that migration out of agriculture into the missing middle (rural nonfarm economy and secondary towns) yields more inclusive growth patterns and faster poverty reduction than agglomeration in mega cities. This suggests that patterns of urbanization deserve much more attention when striving for faster poverty reduction.

Internet-growth nexus: evidence from cross-country panel data

The article investigates the causal relationships between internet, economic growth, government expenditure and inflation in 34 OECD countries during the period 1990 to 2010. Using panel co-integration, empirical results show that they are co-integrated. Moreover, there exists bidirectional causality between internet and economic growth, inflation and economic growth and inflation and internet.