Cross-country Panel Data Research Articles

Projections of industrial water withdrawal under shared socioeconomic pathways and climate mitigation scenarios

We estimated global future industrial water withdrawal (IWW) by considering socioeconomic driving forces, climate mitigation, and technological improvements, and by using the output of the Asia–Pacific Integrated Model/Computable General Equilibrium (AIM/CGE) model. We carried out this estimation in three steps. First, we developed a sector- and region-specific regression model for IWW. The model utilized and analyzed cross-country panel data using historical statistics of IWW for 10 sectors and 42 countries. Second, we estimated historical IWW by applying a regression model. Third, we projected future IWW from the output of AIM/CGE. For future projections, we considered and included multiple socioeconomic assumptions, namely different shared socioeconomic pathways (SSPs) with and without climate mitigation policy. In all of the baseline scenarios, IWW was projected to increase throughout the twenty-first century, but growth through the latter half of the century is likely to be modest mainly due to the effects of decreased water use intensity. The projections for global total IWW ranged from 461 to 1,560 km3/year in 2050 and from 196 to 1,463 km3/year in 2100. The effects of climate mitigation on IWW were both negative and positive, depending on the SSPs. We attributed differences among scenarios to the balance between the choices of carbon capture and storage (CCS) and renewable energy. A smaller share of CCS was accompanied by a larger share of non-thermal renewable energy, which requires a smaller amount of water withdrawal per unit of energy production. Renewable energy is, therefore, less water intensive than thermal power with CCS with regard to decarbonizing the power system.

Violent conflict and inequality

This paper analyses the distributive impacts of internal violent conflicts, in contrast to previous literature which has focused on the effects of inequality on conflict. We use cross-country panel data for the time period 1960–2014 to estimate war-related changes in income inequality. Our results indicate rising levels of inequality during war and especially in the early period of post-war reconstruction. The return of inequality to pre-war levels may take up to four decades after the end of conflict. However, we find that this rise in income inequality is not permanent. While inequality peaks around 5 years after the end of a conflict, it declines again to pre-war levels within the end of the first post-war period. Lagged effects of conflict and only subsequent adjustments of redistributive policies in the period of post-war reconstruction seem to be valid explanations for these patterns of inequality. A series of alternative specifications confirms the main findings of the analysis.

Corruption and Military Expenditure : Evidence from Cross-Country Panel Data

Corruption and Military Expenditure : Evidence from Cross-Country Panel Data

Turning Pink Slips into Red Tape: The Unintended Effects of Employment Protection Legislation

This paper presents evidence on the link between employment protection legislation (EPL) and the rate of unemployment in a cross-country panel data set of OECD countries from 1985-2013. We use both a traditional panel specification with lags of the policy variable, and also a unique structural panel vector autoregression (PVAR) method to determine the long-run dynamic interaction between employment protection legislation and unemployment. We confirm that more restrictive EPL for permanently employed workers causes a significant and persistent increase in unemployment, but the effect is only apparent at long lag lengths, some 2-5 years after the law has been implemented.

The influence of sociopolitical, natural, and cultural factors on international tourism growth: a cross-country panel analysis

This study employed a cross-country panel data model to investigate the relative contributions of sociopolitical, natural and cultural characteristics and national tourism policies to international tourism growth. International tourism receipt data were adjusted for country-specific inflation and then analyzed in relation to standardized measures of the World Economic Forum’s “pillars of tourism competitiveness.” Results indicated that international tourism receipts are more responsive to policies and regulations favoring tourism, abundance of natural resources, richness in cultural heritage, and health and hygiene than they are to infrastructure, safety, price competitiveness, and other variables. Findings highlight key factors associated with international tourism receipts and provide a general framework that could inform policies and management strategies designed to promote sustainable international tourism development.

Global Power Movements, Uncertainty and Democracy in the Middle East

Abstract Studies that examine global determinants of democracy mainly focus on factors such as global conflict, strength of global community, international organizations and the impact of democratic neighbors. This paper logically extends the global approach by considering the impact of global power shifts on democratization in the Middle East. In this paper, it is argued that global uncertainty raised by power shifts in the system is likely to impact authoritarian elite behavior leading to their concession to share political power. This article specifies the assumptions, hypothesis and the causal mechanism through which power shifts might impact democracy in the Middle East. To test the hypothesis, this article uses cross-country panel data and fixed effects GLS regression models on 878 observations, 20 countries ranging from 1815 until 2004. To clarify the argument, examples of democratization process in Iran and Turkey as well as recent 2011 Middle East uprisings are also discussed as illustrative evidence. The results support the argument that global power transfers have short term and long term impacts on democratization in the Middle East.

Income inequality and the composition of public debt

Purpose– The purpose of this paper is to examine the redistributive effect of domestic public debt: lenders to the government lie on the higher end of the income distribution, but the burden of debt financing falls on the entire tax base, to the extent that taxes are used to service debt. Because domestic debt is typically held by domestic lenders, this involves a redistribution of resources.Design/methodology/approach– The author uses cross-country panel data on debt composition, and run regressions of income inequality, as measured by the Gini coefficient, using various specifications, controlling for a variety of macroeconomic, fiscal and political variables.Findings– The author finds that the composition of public debt is consistently a significant determinant of income inequality: the domestic share of public debt is regressive and significant across all specifications, even controlling for total and external debt servicing, political conflict, corruption and a variety of government spending variables.Research limitations/implications– The data span 18 years (1990-2007) which means that long-run effects are hard to track. While the author has a good mix in the sample of observations from low-, middle- and high-income countries, the author is constrained in the choice of countries by the availability of data on inequality and on the composition of public debt.Originality/value– This is the first paper to examine the composition of public debt in terms of domestic and external debt, and any bearing it may have on income inequality. The finding is also new for both the public debt and income inequality literatures: cross-country panel data are consistent with the belief that domestic debt redistributes resources from the entire tax base to wealthy holders of government debt in a way that external debt does not.

High-income export destinations, quality and wages

This paper establishes a link between the income level of the destination countries and the level of average wages in the exporting country across the world economy. We use cross-country panel data to set up an instrumental variable model of high-income export destinations and wages. We find robust evidence that, worldwide, industries that ship products to high-income destinations do pay higher average wages. Our IV results indicate this is a causal relationship. We also explore the operating mechanisms, and find robust evidence in support of a dual link. First, industries that ship products to high-income destination export higher quality goods (as measured by the average unit value of exports within industries). This is because high-income countries demand high-quality products. Second, the provision of quality is costly and requires more intensive use of higher-wage skilled labor. As a result, the production of higher quality products at the industry level creates a wage premium and conduces to higher average industry wages.

The relationship between income inequality and aggregate saving: an empirical analysis using cross-country panel data

ABSTRACTIf the rich save more than the poor, an increase in income inequality raises aggregate saving. We investigate whether income inequality is positively related to aggregate saving ratio by estimating a fixed-effect model based on a panel data of 48 countries for the period 1991–2010. We find evidence that aggregate saving ratio increases with income inequality using various inequality measures. In particular, the effect of income distribution on saving is greater and statistically more significant with in financially developed, rich and OECD countries. It suggests that the rich save much more than the poor under advanced financial system and in a rich country. We also find that the relationship between income inequality and saving ratio is closer in the 2000s than the 1990s. This finding may result from financial development and the high income level in the 2000s.

Is Piketty’s “Second Law of Capitalism” Fundamental?

In Capital in the Twenty-First Century , Thomas Piketty uses what he calls “the second fundamental law of capitalism” to predict that capital-to-income ratios are poised to increase dramatically as economies’ growth rates fall during the twenty-first century. This law states that in the long run the capital-to-income ratio equals s=g, where s is the economy’s saving rate and g its growth rate. We argue that this law rests on a theory of saving that is hard to justify. First, it holds the net saving rate constant as growth falls, driving the gross savings rate to one as growth goes to zero. Second, it is inconsistent with both the textbook growth model and the theory of optimal saving: in both of these theories the net saving rate goes to zero as growth goes to zero. Third, both of these theories provide a reasonable fit to observed data on gross and net saving rates and growth rates in cross-country panel data, whereas Piketty’s does not. Finally, contrary to Piketty’s second law, both of these theories predict that capital-to-income ratios increase only modestly as growth falls.

The Economic and Demographic Transition, Mortality, and Comparative Development

This paper develops a quantifiable unified growth theory to investigate cross-country comparative development. The calibrated model can replicate the historical development dynamics in forerunner countries like Sweden and the patterns in cross-country panel data. The findings suggest a crucial role of the timing of the onset of the economic and demographic transition for explaining differences in development. Country-specific differences in extrinsic mortality are a candidate explanation for differences in the timing of the take-off across countries and the resulting worldwide comparative development patterns, including the bimodal distribution of the endogenous variables across countries. (JEL I12, J11, J13, N33, N34, O41, O47)

Corruption costs lives: a cross-country study using an IV approach.

This study quantitatively estimates the effects of corruption on five major health indicators by using recent cross-country panel data covering 119 countries for the period of 2005-2011. The corruption indicators provided by the World Bank and Transparency International are used, and both the two-way fixed effect and the two-stage least squares approaches are employed for our estimation. The estimation results show that, in general, corruption is negatively associated with a country's health outcomes. A lower level of corruption or a better control of corruption in a country can lead to longer life expectancy, a lower infant mortality rate and a lower under-five mortality rate for citizens. However, our estimation finds no significant association between corruption and individual diseases including human immunodeficiency virus prevalence and tuberculosis incidence. The findings suggest that corruption reduction itself is an effective method to promote health. Copyright © 2015 John Wiley & Sons, Ltd.

Agricultural Growth, Poverty and Inequality in Developing Countries

Drawing upon cross-country panel data for developing countries, the present study shows that agricultural growth is the most important factor in reducing inequality and poverty, and growth acceleration. This is in striking contrast to the dominant view that urbanization is key to growth and elimination of extreme poverty. There is thus a case for a drastic shift away from rural–urban migration and urbanization as main drivers of growth and elimination of extreme poverty, and towards revival of agriculture in the policy discourse that should drive the advancement of the 2030 Sustainable Development Agenda.

Determinants of long-term yields: A panel data analysis of major countries

We utilize cross-country panel data to investigate the determinants of long-term bond yields. To address endogeneity, we use forward interest rates and various forecasts of economists and international organizations. Our result suggests that when an increase in government debt is financed entirely by foreign borrowing, the increase in the forward real interest rate is around three times that when financed domestically. We also find that expectations for aging lower yields. On the other hand, the effect of primary balance is insignificant. Current account balance provides no additional information beyond net foreign debt. We discuss implications of these findings for Japan's and US yields.

The effects of network regulation on electricity supply security: a European analysis

This paper analyzes the interactions of the regulation of distribution networks and electricity supply security. In particular, the hypothesis is tested that output-based regulatory frameworks, which implicitly take into account quality-of-supply-criteria, improve the level of reliability vis a vis purely incentive-based schemes. To do so, novel empirical evidence is analyzed based on a cross-country panel data set covering 27 countries for the period from 1999 to 2013. Regional heterogeneity and potential endogeneity are controlled for. We find that the introduction of output-based regulation, ceteris paribus, leads to reductions of the annual outage duration by 16.05 % on average when compared to incentive-based systems. Given the substantial economic costs of power outages, marginal reliability improvements have considerable economic effects, which can now be quantfied. In the, admittedly hypothetical, case that EU member states, who have not yet done so, were to implement quality-controlling regulation, macroeconomic benefits amount to 930 m. € p.a. The findings support the argument that the value of electricity supply security should be explicitly accounted for when revising regulatory regimes in the future and that investment and maintenance possibilities for regulated firms need to adequately reflect the economic benefits of high levels of service reliability.

Inflation, R&D and growth in an open economy

This study explores the long-run effects of inflation in a two-country Schumpeterian growth model with cash-in-advance constraints on consumption and R&D investment. We find that increasing domestic inflation reduces domestic R&D investment and the growth rate of domestic technology. Given that economic growth in a country depends on both domestic and foreign technologies, increasing foreign inflation also affects the domestic economy. When each government conducts its monetary policy unilaterally to maximize the welfare of domestic households, the Nash-equilibrium inflation rates are generally higher than the optimal inflation rates chosen by cooperative governments who maximize the welfare of both domestic and foreign households. Under the CIA constraint on R&D (consumption), a larger market power of firms amplifies (mitigates) this inflationary bias. We use cross-country panel data to estimate the effects of inflation on R&D and also calibrate the two-country model to data in the Euro Area and the US to quantify the welfare effects of decreasing the inflation rates from the Nash equilibrium to the optimal level.

Effects of intellectual property rights and patented knowledge in innovation and industry value added: A multinational empirical analysis of different industries

Technological innovation drives long-term economic growth, so most countries attempt to provide an innovation-friendly environment that includes tightening protection of intellectual property rights (IPR). However, debate continues on whether strengthened IPR lead to technological development and economic growth: patents promote innovation by protecting appropriation from invention and disclosing knowledge to the public, but they also create excessive monopoly power that may impede further innovation.Using simultaneous equations with cross-country panel data from 12 countries and 3 industries (chemical, electronic, machinery), we estimated the direct effect of IPR on industry value added and the indirect effect of it through enhanced research and development (R&D). The bilateral role of IPR, as measured by patented knowledge, was used to distinguish different characteristics of industries as well as the positive and negative effects of IPR on innovation.Results suggest that IPR generally enhance industry value added, but the positive effect is mitigated with increased enforcement of IPR. Also, IPR enhanced R&D but showed a negative relationship with patented knowledge, suggesting that excessive propertization of knowledge may hinder sequential innovation. The positive role of IPR on R&D predominated in the chemical (discrete) industry and exerted negative effects in the electronic and machinery (complex) industries.

Global liquidity through the lens of monetary aggregates

This paper examines how the financial activities of non-financial corporations (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.

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.