Dynamic Panel Data Model Research Articles

Inflation and inequality: new evidence from a dynamic panel threshold analysis

This paper investigates nonlinearities in the inflation-inequality relationship using a dynamic threshold panel data model and data for 101 countries over the period 1985–2020. We find that inflation rates exceeding 6% are associated with higher income inequality whereas below this threshold, the correlation remains insignificant. From a monetary policy perspective, these findings suggest that a disinflation policy will likely lead to a more equal income distribution in high-inflation countries whereas there is no such effect in a low-inflation setting. In addition, we find that a higher initial level of inequality as well as unemployment has an inequality-enhancing effect. Contrary to previous research, our inflation threshold is endogenously determined, and we control for the Nickell bias arising from the inclusion of the lagged level of inequality. Moreover, our paper covers a much longer time period and also a broader set of developed and developing countries. Our findings have important policy implications, especially against the background of the recent sharp increase in inflation.

Oracle Efficient Estimation of Heterogeneous Dynamic Panel Data Models with Interactive Fixed Effects

We propose a two-step procedure to estimate a heterogeneous dynamic panel data model with interactive fixed effects. We establish the asymptotic properties of the estimators and show that the final estimator is oracle efficient. We also propose a specification test for the null hypothesis of homogeneous slopes and study the asymptotic properties of the test statistic under both local and global alternatives. Simulations demonstrate the fine performance of the estimator and test statistic. The new estimation and inference methods are applied to study the heterogeneous effects of minimum wage on employment across different counties in the United States. Our dynamic model suggests that the changes of employment range from about–1% to 1% when the minimum wage increases by 1%.

Foreign Direct Investment, Public Debt and Economic Growth in Developing Countries

This study focuses on the FDI-public debt-economic growth nexus in developing countries. Twostep system generalized method of moments (GMM) estimation is applied in dynamic panel data models using a dataset covering 67 developing countries in the period from 2000 to 2019. The findings reveal that FDI is a growth stimulus factor and the growth effect of public debt is nonlinear. While FDI enhances the positive growth effect of public debt, public debt impedes FDI-induced growth. In country groups by region, public debt has a largest negative impact on the growth effect of FDI in African, while in Asian and Latin American countries, this impact is less. In country groups by income level, the impact of public debt on FDI growth effect is negative in middle income countries and none in high income countries. FDI extends the range of positive growth effect of public debt in middle income countries while it reduces the negative growth effect of public debt in high income countries.

THE IMPACT OF LEGAL FRAMEWORK ON FEMALE ENTREPRENEURSHIP: A PANEL DATA ANALYSIS

Female self-employment can be both a way of increasing female labor force participation and diversity in entrepreneurship. While there are many studies explaining the individual characteristics causing differences in women and men choosing self-employment, studies explaining substantial variation of female entrepreneurship rate between countries are relatively few. Therefore, the objective of this study is to investigate the socio-cultural, legal and economic conditions of the countries that can lead female entrepreneurship rates vary by using World Bank data on 112 countries and dynamic panel data model. Results based on the estimation of this model denotes the importance of legal framework in terms of increasing female entrepreneurship rates alongside the determinants previously searched. The countries reaching closer to legal equality between women and men in terms of business opportunities have higher share of female entrepreneurs.

Capital structure, business model innovation, and firm performance: Evidence from Chinese listed corporate based on system GMM model.

This paper aims to verify the impact of capital structure on business model innovation and firm performance and the mediating effect of business model innovation. We use the data of the Chinese growth enterprises market (GME) listed high-tech firms from 2016 to 2022 as a dynamic panel data model with the system-generalized method of moments (sys-GMM), adopting return on asset and earning per share as firm performance. Our results show that capital structure has a lag effect on firm performance. The total debt ratio in the last period has a significant non-linear impact on the performance and business model innovation level of nowadays, presenting a U-shaped relationship. The first-order lag short-term debt ratio positively improves firm performance. Business model innovation significantly promotes better firm performance, and business model innovation does exist in the mediating effect between enterprise capital structure and its performance. These results remain robust to different sample sizes or proxy variables. This paper proposes some suggestions for firm operations and government policies based on the findings.

Institutions, Investment and Economic Growth: Evidence from Sub-Saharan Africa

Sub Saharan African countries experience low private investment compared to other developing countries in world. For instance, private investment in the region averaged 15% of GDP from 2010 to 2016, as compared to 22%, 18% and 17% for developing countries in Asia, Europe and Latin America respectively. This low investment level constrained the region’s ability to grow and improve social outcomes such as; increase in the real wages and poverty reduction. Low quality institutions could explain this phenomenon. Therefore, this study examined the effect of institutions on investment and economic growth of 37 SSA countries from 1996 to 2017 using dynamic panel data model. The data were retrieved from Worldwide Governance Indicators, World Development Indicators and the Chinn-Ito index. System Generalised Method of Moments was used to estimate the result. The key findings generated by the study confirmed that these measures of institutional variables and there interaction with investment yield a positive and statistically significant result. Indicating that strengthening the quality of these institutions could positively affect investment and economic growth of the region. For instance, unit increase in controlling corruption increases investment by 1.4%. Furthermore, there is evidence showing financial development slows investment growth, which can be attributed to the weak institutional arrangements, as the coefficient of financial development is negative and statistically significant. The study recommends that SSA countries should pay greater attention on institutional reforms particularly; control of corruption and political stability to drive a meaningful growth and development in the region.

Foreign Aid, Remittances and Poverty in Sub-Saharan Africa (2007-2018)

This study examined the impact of foreign aid and remittances on poverty in 37 sub-Saharan African countries from 2007 to 2018, a region that has received significant aid and remittances over the past 20 years. Key variables included Poverty Headcount (%), international remittances, and foreign aid flows. Data were obtained from the World Development Indicators, OECD, and the GCIP published by the United Nations. A dynamic panel data model was used, estimated with the system-Generalized Method of Moments (sys-GMM). The AR (2) and Hansen test statistics supported the model’s validity, and a robustness check with Real Household Final Consumption Expenditure confirmed the results. The findings indicate that remittances significantly reduce poverty in the short run but not in the long run, while foreign aid has an insignificant positive effect. The study recommends reducing remittance costs, removing barriers to inflow, and creating a policy environment that enhances the effectiveness of aid.

Research on the Development Path of E-commerce for Rural Tourism in the Context of Information Technology

Abstract In the digital age, e-commerce has emerged as a transformative force in the domain of rural tourism, infusing traditional practices with renewed dynamism. This study employs the spatiotemporal extreme entropy value method to assess the evolution of rural tourism in China. The investigation delves into the influence of e-commerce on the qualitative enhancement of rural tourism, utilizing a dynamic panel data model to analyze its effects and conducting heterogeneity tests based on geographic and economic criteria. According to the weights assigned by the spatiotemporal extreme entropy method, the quality of rural tourism development in China generally increased between 2013 and 2023, with a notable dip to 0.3005 in 2020. The heterogeneity analysis, implemented through a fixed-effects model, reveals significant positive impacts in both the eastern and central regions at the 5% significance level. Moreover, regions with a medium level of economic development exhibit a robust positive effect, with a regression coefficient of 0.429. The developmental impact of e-commerce on high-quality rural tourism is statistically significant at the 1% level, and all control variables demonstrate significant positive correlations. These findings underscore the substantial role that e-commerce development plays in advancing high-quality rural tourism.

Identifying the proper mix of growth-seeking strategies for Spanish SMEs: An analysis during times of economic boom and crisis

This study explores the potential effects of different combinations of growth-seeking strategies on performance in SMEs during long times of economic boom and crisis. Our hypotheses are tested on a representative sample of Spanish SMEs between 1994 and 2014. During these years Spain suffered one of the periods of greatest economic stability/growth in recent years (1994-2008), followed immediately by a period of severe crisis (2009-2014). Using dynamic panel data models, our findings reveal that four combinations exhibit a positive and statistically significant effect on performance in times of economic boom: a related product strategy combined with low, moderate, or high levels of internationalization, and an unrelated one combined with a moderate level of internationalization. Meanwhile, we find only two combinations with a positive impact on SME performance in times of crisis: a related product strategy combined with low and moderate levels of internationalization, respectively

Labour share and income inequalities in the European Union, taking into account the level of development of economies

Research background: The relationship between labour share and income inequality is a complex and multifaceted problem. Despite ongoing discussions among economists, there is still no consensus on the direction of the relationship between labour share and income inequality. Purpose of the article: The article aims to assess the impact of labour share on income inequality, which is measured in three ways: the Gini index of gross income, the Gini index of market incomes, and the Gini index of household disposable income. Methods: Dynamic panel data models were applied to estimate the relationship between Gini coefficients and socio-economic indicators. The study investigated 25 European Union countries over the 2011–2021 period. Findings & value added: Despite the long convergence process of the EU economies, there is still great diversity in the labour share, social inequalities, and the interplay between these factors. The added value of this research is the indication of labour share impact on three Gini measures covering a diverse income spectrum (from labour and capital). Based on the research findings, hypothesis 1, claiming that the more developed the national economy, the lower the share of employment income, favouring capital gains, is confirmed. Hypothesis 2 (as the share of income from work increases, the Gini coefficient of gross incomes decreases) must be rejected. There is no significant relationship between labour share and the studied Gini measures in 'old' EU countries. In 'new' EU members, there is a reverse relationship than assumed in hypothesis 2. The growth of the Gini coefficient was influenced by the rise in labour share, which can be attributed to the diversity in economic structures.

Fiscal Balance Factors of the Local Government: Panel Data Evidence from OECD Countries

Fiscal balance is perceived as a principal measure of fiscal sustainability in the local government. It also affects the budgetary response to a potential recession, determining a fiscal distress and a financial resilience. Thus, the economists conduct studies to identify factors influencing the fiscal balance at the local public level. Therefore, the aim of the paper is to examine fiscal, socio-economic, political, and institutional factors which affect the level of fiscal balance of the local government sector in Gross Domestic Product (GDP) on the basis of the OECD countries in the period 2007–2021. In the study both panel data models with fixed effects (FE) and random effects (RE), dynamic panel data models (GMM), as well as panel quantile regressions with fixed effects were estimated. As a result, the paper confirms that fiscal balance of the local government in GDP is affected by fiscal decentralisation on the expenditure side, an investment activity, a change in the debt ratio, an inflation, a change in the unemployment rate, the Human Development Index, the trade openness, the GDP growth, and local elections. What was also found was a statistically significant influence of the corruption in the case of the panel quantile regression with fixed effects. In addition, the Mann-Whitney U test, the Kruskal-Wallis test, and the Dunn test were applied to identify whether the level of fiscal balance of the local government sector in GDP had the same distribution in Central and Eastern European (CEE) countries and other OECD countries.

The role of renewable energy, tax revenue and women governance in environmental degradation for developing Asian countries

The study is pioneer to investigate the role of renewable energy, tax revenue and women governance in reducing CO2 emissions in 29 Asian developing countries over the period 1996–2020. To this end, dynamic and static panel data models such as GMM and quantile regression are employed for unbalanced and heterogeneous data. The results suggest that quantile regression model is more robust than GMM for the estimation. The findings show that the renewable energy has significant and negative effect on CO2 emissions in all quantiles whereas the impacts of tax revenue and women governance on CO2 emissions are varying across the quantiles. On this occasion, the findings confirm that renewable energy can be used as a policy variable while tax revenue and women governance are not reliable for policy implications. Furthermore, the findings revisit the previous studies. Since the renewable energy has significant and negative association with CO2 emissions in Asian developing economies, policy implications must consider renewable energy transition in order to reduce carbon dioxide emissions.

Security fragility in developing countries: Do ICT matter?

Information and Communication Technologies in developing countries have increased considerably over the past three decades and fuel extremely plentiful literature. This article aims to assess the effects of Information and Communication Technologies on the security fragility observed. Thus, starting from the different dimensions of security fragility (internal conflicts, external conflicts), we specify and estimate a dynamic panel data model of a sample of 101 developing countries by the System Generalized Method of Moments over the period 1996–2019. Two main results emerge. Firstly, Information and Communication Technologies significantly reduce internal conflicts and external conflicts in developing countries. Controlled by two complementary measures of Information and Communication Technologies (quality and quantity), our results remain stable and robust. Secondly, the results of the mediation analysis show that the effect of Information and Communication Technologies on security fragility is mediated by financial development and remittances. We suggest, in addition to the quantitative and qualitative amelioration of the telecommunication infrastructures, the strengthening regulatory framework for the use of ICTs and the optimist promotion of a digital culture to mitigate intra- and inter-state conflicts.

Research on the Influence of Depth and Breadth of Equity Reform on the Performance of State Owned Enterprises Based on Dynamic Panel Data Model

In order to explore the necessity of mixed ownership reform of state-owned enterprises and clarify the direction of mixed ownership reform of state-owned enterprises in China, this paper uses dynamic panel data model and bootstrap-DEA method to study the impact of “depth” and “breadth” of equity reform of state-owned enterprises in China on the performance of state-owned enterprise. The results show that there is an inverted U-shaped relationship between performance and the level of equitable reform of state-owned enterprises. When the depth of equity reform is 36.6%, the performance of mixed reform enterprises is the best. There is a positive U-shaped relationship between the breadth of equity reform and the performance of state-owned enterprises. When the breadth of equity reform is 12.47%, the performance of mixed reform enterprises is the worst. At the same time, it is found that the average performance of the sample enterprises shows an obvious downward trend, while the performance variance of the sample enterprises shows an obvious upward trend, and this trend has not changed significantly after China launched a new round of state-owned enterprise reform in 2015. According to the above research findings, this paper believes that the intervention of government forces is conducive to promoting the survival of the fittest of state-owned enterprises and the overall optimal allocation of social resources, but we should pay attention to the adoption of market-oriented means and should not directly interfere with the mixed reform of state-owned enterprises. At the same time, the mixed reform of state-owned enterprises in China is either relatively thorough, giving up the dominance of the largest state-owned shareholder, giving other shareholders a greater say, or not to carry out mixed reform, or symbolic mixed reform, otherwise it may aggravate the internal friction of the mixed reform state-owned enterprises, resulting in worse performance.

Declining real interest rates: The role of energy prices in energy importers

This study investigates whether the upward trend in real energy prices since the 1990s can account for the decreasing trend in real interest rates in energy-importing countries. By estimating dynamic panel data models, I first provide empirical evidence that a rise in real energy prices leads to falls in real interest rates and aggregate consumption in energy-importing OECD member countries. Using a life-cycle model, I show that the increasing trend in real energy prices decreased the equilibrium real interest rate by about 1.4 percentage points between 1990 and 2018. The mechanism for this effect is as follows: As a result of the increases in the real energy price, energy consumption falls, dampening the consumption of manufactured goods because of the complementarity in consumption between energy and manufactured goods. Accordingly, aggregate consumption declines, putting downward pressure on the real interest rate. Moreover, the increased real energy price decreases energy input in production, raising the capital/energy ratio and inducing a lower real interest rate via a fall in the marginal product of capital. Through a simulation, I also demonstrate that increases in the real energy price had a greater influence on the declining real interest rate in energy-importing countries during 1990–2018, compared to population aging.

ESG activity and bank lending during financial crises

This paper explores how banks’ environmental, social, and governance (ESG) activities affect their lending during financial crises. We use a sample of European listed banks with available ESG scores from 2002 to 2020 and consider the global financial crisis of 2007–2009 and the European sovereign debt crisis of 2010–2012. We estimate a two-step system GMM dynamic panel data model and also address potential endogeneity with instrumental variable (IV) and difference-in-difference (DiD) estimations. We find that lending falls to a lesser extent for banks with higher ESG scores during crisis times. Our findings are robust to using alternative ESG rating providers. An investigation of the different potential channels shows that, during crises, banks more engaged in ESG activities are less affected in terms of credit risk, asset risk, and profitability. They also face a lower reduction in market funding, allowing them to downsize to a lesser extent during crises, and their deposit rates do not increase as much as in less ESG-engaged banks. A deeper investigation reveals that our findings mainly hold for banks focused on traditional lending and deposit activities and are essentially driven by the environmental pillar component of ESG scores and the global financial crisis of 2007–2009.

Does vulnerable employment narrow income inequality? Evidence from developing countries

Most people at the lower end of the income spectrum in developing countries rely on vulnerable employment for their survival. In the absence of alternative sources of income, vulnerable employment narrows income inequality (inequality) by providing income to these workers. This study examines this assertion by using data from a panel of 65 developing countries covering 1995-2019. The empirical analysis is based on dynamic panel data models. Two critical findings emerge from this study. First, in developing countries, vulnerable employment reduces inequality, although the reduction is quite marginal. Second, vulnerable employment has a gender-specific effect on narrowing inequality. Specifically, male vulnerable employment has a greater impact on reducing inequality than its female counterpart. In light of the efforts of developing countries to reduce inequality (SDG 10) and to provide decent work for all (SDG 8), this study is of particular importance.

Estimation and variable selection for high-dimensional spatial dynamic panel data models

Spatiotemporal modeling of networks is of great practical importance, with modern applications in epidemiology and social network analysis. Despite rapid methodological advances, how to effectively and efficiently estimate the parameters of spatial dynamic panel models remains a challenging problem. To tackle this problem, we construct consistent complex least-squares estimators by the eigendecomposition of a spatial weight matrix method originally proposed for undirected networks. We no longer require all eigenvalues and eigenvectors to be real, which is a remarkable achievement as it implies that the proposed method is now applicable to spatiotemporal data modeling of directed networks. Under mild, interpretable conditions, we show that the proposed parameter estimators are consistent and asymptotically normally distributed. We also present a complex orthogonal greedy algorithm for variable selection and rigorously investigate its convergence properties. Moreover, we incorporate fixed effects into the spatial dynamic panel models and provide a model transformation so that the proposed method can also be applied to the transformed model. Extensive simulation studies and data examples demonstrate the effectiveness of the proposed method.

PUBLIC SPENDING AND UNEMPLOYMENT: DATA FROM EUROZONE COUNTRIES

The relationship between public spending and unemployment is an important topic of study in economics. Public spending was seen as the main cause of rising unemployment, contrary to the idea that it would contribute to the reduction of unemployment. The present paper studies the relationship between the unemployment rate and public spending in a panel of 16 EU states, covering the period 1990–2019 panel and generalized method of moments (GMM) to estimate our dynamic panel data model, which also takes into account the lagged unemployment rate. The model results indicate that public expenditure has a significant positive impact on unemployment. These results confirm the existence of the Abrams curve and the relationship between these two variables is positive.

Consistent estimation of panel data sample selection models

The properties of classical panel data estimators including fixed effect, first-differences, random effects, and generalized method of moments-instrumental variables estimators in both static as well as dynamic panel data models are investigated under sample selection. The correlation of the unobserved errors is shown not to be sufficient for the inconsistency of these estimators. A necessary condition for this to arise is the presence of common (and/or non-independent) non-deterministic covariates in the selection and outcome equations. When both equations do not have covariates in common and independent of each other, the fixed effects, and random effects estimators in static models with exogenous covariates are consistent. Furthermore, the first-differenced generalized method of moments estimator uncorrected for sample selection as well as the instrumental variables estimator uncorrected for sample selection are both consistent for autoregressive models even with endogenous covariates. The same results hold when both equations have no covariates in common but are correlated once we account for such correlation. Under the same circumstances, the system generalized method of moments estimator adding more moments from the levels equation has moderate bias. Alternatively, when both equations have common covariates the appropriate correction method is suggested. Serial correlation of the errors being a key determinant for that choice. The finite sample properties of the proposed estimators are evaluated using a Monte Carlo study. Two empirical illustrations are provided.