Cross-country Panel Data Research Articles

Does income inequality lead to banking crises in developing countries? Empirical evidence from cross-country panel data

This study empirically examines whether increasing income inequality results in banking crises using panel data for 68 countries covering the years 1973 to 2010. The results show that developing countries with high inequality tend to have higher levels of domestic credit and that domestic credit booms increase the probability of banking crises. We also find that developing economies display direct channels from inequality to banking crises without an association with credit booms. We find no consistent evidence that income inequality contributes to banking crises in advanced economies. In developing countries, the probability of banking crises increases dramatically as income inequality levels increase: The probability of a systemic banking crisis within three years is 9.5% when the Gini is as low as 0.2 in developing countries and increases to 57.4% when the Gini is 0.4. These results are robust to several specifications.

Information communication technology (ICT) infrastructure and economic growth: A causality evinced by cross-country panel data

This study examines certain long-run relationships hypothesised to be present among per capita real GDP, information and communication technology (ICT) infrastructure, consumer price index, labour force participation rate, and gross fixed capital formation manifest in G-20 countries recorded for the 2001–2012 period. Using panel cointegration, the study finds that the variables are cointegrated and do not drift apart in the long run. Methodology using vector error correction models (VECM) further confirms that embellishment of ICT infrastructure – an apparent imperative in an economy's information technology (IT) policy formulation – for both fixed broadband and internet users causes a boost in the per capita GDP.

The Role of Total Factor Productivity Growth in Middle-Income Countries

ABSTRACTWe examine the importance of total factor productivity (TFP) growth in middle-income countries (MICs) based on cross-country panel data for the period of 1975–2014. We find that TFP growth contributed significantly to a country’s upward transition from middle-income to high-income country group. The TFP growth model reveals that the catch-up effect, human capital, smaller population, weak currency, and research and development growth are significant sources of TFP growth. We do not find a systematic difference in the TFP growth models for MICs. In analyzing the role of factors influencing TFP growth at different income stages, strengthening innovative activities and building innovative capacities are important in overcoming the challenges that MICs face when transitioning to the high-income group. Governments of upper MICs need to initiate reform to motivate innovation by optimizing national R&D systems, and redesigning the educational system to target promoting innovation.

Impact of institutions on emerging European high-growth firms

PurposeBased on the multi-faceted nature of high-growth firms (HGFs) and the significant investments by governments to make the business environment more conducive to firm growth, the effects of changing institutions impacting on HGFs has not been explored in any great detail. While the authors have a very clear understanding of the spatial variations of HGFs and their firm characteristics in various advanced countries, the authors are lacking such insights for emerging countries. The paper aims to discuss these issues.Design/methodology/approachGiven the growth prospects and economic reforms, the authors chose emerging Central and Eastern European (CEE) countries as the research context. Utilising a cross-country panel data set spanning 11 countries, the authors investigate the share of HGFs across these countries and further examine how changes in institutions impact firms to become HGFs. The authors frame the arguments around three institutional dimensions, namely corruption, investment climate and bureaucratic quality.FindingsThe findings suggest that the rates of HGFs are significantly higher in emerging CEE countries as compared with those in developed countries. Second, the results show that an improvement in a country’s institutional environment impacts positively on the likelihood of firms becoming HGFs. Among the three measures of institutions, bureaucratic quality seems to have the largest positive impact as compared with corruption and investment climate.Originality/valueThe authors contribute to the literature by presenting the share of HGF across 11 emerging CEE countries and estimating how changes in institutions impact on firms becoming HGFs for the period 2000-2013.

Did Fiscal Stimulus Lift Developing Asia Out of the Global Crisis? An Empirical Investigation

The substantial slowdown of economic growth since the global financial crisis of 2008-2009 is rekindling debate on whether developing Asia should use fiscal expansion to boost aggregate demand. A key factor in the debate is the effectiveness of countercyclical fiscal policy in the region. The global crisis, as well as the fiscal stimulus packages implemented by developing Asian countries at that time, give some clues to this important issue. The region weathered the global crisis well and experienced a robust V-shaped recovery. According to conventional wisdom, the fiscal stimulus packages put in place by Asian governments played a key role in the region’s recovery. The central objective of this paper is to empirically test this wisdom by using cross-country panel data. Our main finding is that the stimulus has had a limited but positive impact on developing Asia’s output during the global crisis. This lends some support to the notion that countercyclical fiscal policy can help the region cope with severe external shocks. The broader, more fundamental implication for regional policymakers is that the region’s long-standing commitment to fiscal discipline can yield significant benefits beyond macroeconomic stability. An important consequence of this commitment relatively healthy fiscal balance sheets - enabled the region’s governments to quickly and decisively embark upon fiscal stimulus programs.

Reducing Child Mortality and Malnutrition: Cross-Country Evidence on the Role of Growth and Social Indicators.

In this paper, we examine whether the world is on track for meeting its Sustainable Development Goals (SDGs) regarding child mortality and malnutrition by investigating the cross-country panel data covering 86 developing countries between 2000 and 2016. We take the immediate-underlying-basic determinants framework developed in previous studies and apply panel data and instrumental variables techniques after correcting for prevailing heteroskedasticity and auto-correlation. We then estimate the consequent reduction in child mortality and malnutrition in various countries under varying growth scenarios and policy emphasis on improving certain social indicators. We find that by 2030, the world largely with the notable exception of sub-Saharan Africa would achieve the child mortality goals, though a strong focus on social indicators along with the growth could lift a majority of the remaining sub-Saharan African countries too. However, on the malnutrition front, performance would be far from satisfactory and most of the countries would fail. Nevertheless, growth will still play a dominant role particularly in Asia-Pacific, Eastern Europe and South Asia whereas in sub-Saharan Africa and Middle-East an equal focus on improving social indicators would be needed as well.

The Effect of the Sectoral Composition of Economic Growth on Rural and Urban Poverty

This paper analyses the channels through which growth reduces poverty by evaluating the relationship between the sectoral composition of economic growth and the rural-urban composition of poverty. Unlike previous studies, that use single country or multi-country cross-sectional data, the analysis pioneers the use of cross-country panel data to address this issue. Findings show that rural (urban) poverty is highly responsive to agricultural (non-agricultural) productivity growth. The effect of agricultural productivity growth on rural poverty is particularly strong for countries with little dependence on natural resources. The effects of non-agricultural productivity on urban poverty are not sensitive to initial conditions. Moreover, results suggests that growth in the share of employment in the non-agricultural sector (i.e., structural transformation) seems to reduce rural poverty, most notably for countries at a low initial level of development.

A cross-national study of knowledge, government intervention, and innovative nascent entrepreneurship

Which kind of government intervention is needed to transform scientific and technological knowledge into innovative nascent entrepreneurship? We answer this question by drawing upon the knowledge spillover theory of entrepreneurship and institutional theory. We empirically examined the moderating effect of government intervention on the relation between knowledge and innovative nascent entrepreneurship with cross-country panel data on 47 countries from 2002 to 2012. Our results first show that a smaller government sector is required to transform technological knowledge into innovative nascent entrepreneurship. In addition, we found that a larger government sector and more regulation of credit, labor, and business increase the transformation of scientific knowledge into innovative nascent entrepreneurship. We contribute to understanding the role of government in transforming scientific and technological knowledge into innovative nascent entrepreneurship.

MARRIAGE AND ECONOMIC DEVELOPMENT IN THE TWENTIETH CENTURY

Abstract:There is an extensive literature discussing how individuals’ marriage behavior changes as a country develops. However, no existing data set allows an explicit investigation of the relationship between marriage and economic development. In this paper, we construct new cross-country panel data on marital statistics for 16 OECD countries from 1900 to 2000, in order to analyze such a relationship. We use this data set, together with cross-country data on real GDP per capita and the value added share of agriculture, manufacturing, and services sectors, to document two novel stylized facts. First, the fraction of a country’s population that is married displays a hump-shaped relationship with the level of real GDP per capita. Second, the fraction of the married correlates positively with the share of manufacturing in GDP. We conclude that the stage of economic development of a country is a key factor that affects individuals’ family formation decisions.

KEY FACTORS OF NON-PERFORMING LOANS IN BALTIC AND SCANDINAVIAN COUNTRIES: LESSONS LEARNED IN THE LAST DECADE

A cross-country panel data regression was performed for non-performing loans (NPL) in Denmark, Estonia, Finland, Latvia, Lithuania and Sweden covering a period of years 1998-2014. The main objective was to determine the major factors that were driving the NPL in the selected countries. Also, we expected to draw the differences in the banking industry between emerging economies in the Baltic countries and Western economies in the Scandinavian region. The selected variables were banking industry-related (net interest margin, ROA, ROE) and macroeconomic variables (GDP growth, RE prices, Unemployment), of which the majority is included as the Financial Soundness Indicators by the IMF. Key findings of the research show that NPL in both regions were mostly dependent on GDP growth and Unemployment, whereas the banking industry variable ROA had a very moderate effect only on a country level. The research is contributing to a better understanding of financial stability in the banking industry during the last decade, and it may have possible implications for the macroprudential policy.

An Investigation into the Impact of Mobile Technologies on Economic Growth and Employment in the Caribbean

The adoption of mobile technologies in developing countries in Africa, the Caribbean and Asia has grown exponentially. People in poor regions are using mobile phones for banking, business transactions, socializing, staying connected and monitor the weather. This has reduced the need for travel, lead to the creation of new businesses, shorten supply chains and boost productivity. Consequently, these technologies can be used to eliminate the time and distance barriers between businesses and their customers. This paper examined the impact of mobile technologies in ten Caribbean countries which are primarily developing countries. It utilized a cross-country panel data and regression analysis to estimate and investigates the impact of mobile technologies on economic growth. Results from the paper showed that all the coefficient of the mobile technology components namely the internet user ratio, mobile-cellular telephone subscriptions and the fixed-telephone subscriptions were all significant and positive across all the regressions. This is because of the belief that they contribute to the knowledge spillover, which consequently enhances economic growth.

Does microfinance reduce poverty? Some international evidence

AbstractIn this paper, the hypothesis that microfinance is an effective tool for reducing poverty at the macro level is tested using a unique cross-country panel data set from 106 countries for the period 1998–2013. Taking into account the potential problem of sample selection bias and endogeneity, this paper shows that microfinance has a negative effect on poverty. The results are robust to the choice of microfinance measures and poverty indicators. They suggest that in developing and emerging countries, the establishment of more MFIs should be encouraged, and more funds should be directed from development agencies and governments into MFIs, to reduce poverty.

How does urbanization affect carbon dioxide emissions? A cross-country panel data analysis

As a crucial indicator of modernization, urbanization has significant effects on carbon dioxide emissions. Using a panel data of 141 countries over the period of 1961–2011, this paper analyzes the impact of urbanization on carbon dioxide emissions empirically. We employ two-way fixed effects model based on the extended STIRPAT theoretical frameworks. Our results show that there is an inverted U-shaped relationship between urbanization and carbon emissions and the turn point is around 73.80%. But excessive urban concentration can claim the benefits of high-level urbanization. These findings can also help policy makers to use efficient urbanization to curb the carbon emissions, especially for the Asian countries that with high density of population.

Corruption costs lives: evidence from a cross-country study

This paper investigates the effect of corruption on health outcomes by using cross-country panel data covering about 150 countries for the period of 1995 to 2012. We employ ordinary least squares (OLS), fixed-effects and two-stage least squares (2SLS) estimation methods, and find that corruption significantly increases mortality rates, and reduces life expectancy and immunization rates. The results are consistent across different regions, gender, and measures of corruption. The findings suggest that reducing corruption can be an effective method to improve health outcomes.

Microfinance and gender inequality: cross-country evidence

ABSTRACTMicrofinance enables poor women to engage in income-generating activities, which helps them become financially independent, strengthening their decision-making power within the household and society. Consequently, microfinance has the potential to reduce gender inequality (GI). Case-study evidence from across the developing world both supports and contradicts this hypothesis. We therefore revisit this issue using macroeconomic cross-country panel data for 64 developing economies over the period 2003–2014. We find that women’s participation in microfinance is associated with a reduction in GI. However, regional interactions reveal that cultural factors are likely to influence the GI–microfinance nexus.

Granger Causal Nexus between Financial Development and Energy Consumption: Evidence from Cross Country Panel Data

Granger Causal Nexus between Financial Development and Energy Consumption: Evidence from Cross Country Panel Data

Media Freedom and Social Capital

ABSTRACTThis article examines the relationship between media freedom and social capital by using cross-country panel data. The hypothesis of the current study is the U-shaped relationship between media freedom and social capital, which is based on the claims that media freedom has a negative impact on bonding social capital and a positive effect on bridging social capital. To test the hypothesis, this study uses OLS and 2SLS regression methods, as well as panel data random effects regression. The empirical findings support the hypothesis of the U-shaped relationship.

Investor protection and country-level governance: cross-country empirical panel data evidence

Using a cross-sectional sample of yearly observations covering 132 countries over the 2007–2012 period, this article intends to provide empirical evidence that country-level governance has an impact on the strength of investor protection. Also, when proceeding to a multiple regression analysis based on income classification, as defined by the World Bank, one can observe a different behaviour of the relationship between country-level governance (proxied using the principal component analysis method) and the strength of investor protection.

The Role of Total Factor Productivity Growth in Middle-Income Countries

We examine the importance of total factor productivity (TFP) growth in middle-income countries based on cross-country panel data for the period 1975–2014. We find that TFP growth contributed significantly to a country’s upward transition from middle-income to high-income country group. The TFP growth model reveals that the catch-up effect, human capital, smaller population, weak currency, and research and development (R&D) growth are significant sources of TFP growth. We do not find a systematic difference in the TFP growth models for middle-income countries. In analyzing the role of factors influencing TFP growth at different income stages, strengthening innovative activities and building innovative capacities are important in overcoming the challenges that middle-income countries face when transitioning to the high-income group. Governments of upper-middle-income countries need to initiate reform to motivate innovation by optimizing national R&D systems, and redesigning the educational system to target promoting innovation.

Economic complexity, human capital and economic growth: empirical research based on cross-country panel data

ABSTRACTEconomic complexity reflects a country’s production capabilities and plays an important role in economic growth. This article measures the economic complexity of 210 countries using the method of reflections, and investigates the impact of economic complexity and human capital on economic growth. The measurement results show that there are significant differences regarding the level of complexity among countries. High-income economies have higher complexity than low- and middle-income economies. The empirical findings demonstrate that economic complexity and different levels of human capital have positive effects on long- and short-term growth. A positive interaction effect on economic growth exists between economic complexity and human capital. In addition, secondary education as a proxy for human capital has a relatively greater positive direct effect and a much stronger interactive effect with complexity on economic growth. In addition, the magnitude of the interaction effect between economic complexity and human capital on long- and short-term growth increases as the revealed comparative advantage threshold grows.