Dynamic Panel Threshold Model Research Articles

Does natural resource dependence restrict green development? An investigation from the “Belt and road” countries

Addressing natural resource dependence is integral to achieving the Sustainable Development Goals by promoting economic diversification, environmental sustainability, and climate resilience. This study explores the effect of natural resource dependence on green development by adopting the balanced panel dataset from the “Belt and Road” countries from 2005 to 2019. Notably, the novelty of our analysis lies in the empirical analysis using instrument-based techniques that consolidate the “green development curse hypothesis” in the Belt and Road countries. The mechanism analysis reveals that natural resource dependence curbs green development by weakening innovative capability, disturbing institutional quality, reducing population density, and crowding out human capital. Further, the dynamic panel threshold model handling endogeneity verifies the nonlinear relationship between natural resource dependence and green development. Interestingly, digital trade offers greater “resilience” than traditional trade, correcting the resource curse dilemma. Finally, heterogeneity analyses indicate that the green development curse hypothesis only exists in countries with high-level environmental regulations and resource-based countries.

The potential impact of digital economy on energy poverty in the context of Chinese provinces

This study focused on exploring the impact of the digital economy (DE) on energy poverty (EP) across Chinese provinces from 2004 to 2018, motivated by the critical need to understand how technological advancements in the digital sector influence energy accessibility and sustainability. Conducted against the backdrop of global digital transformation, the research aimed to dissect the nuanced ways in which the DE contributes to mitigating EP, employing dynamic panel threshold and indirect effect models to capture both the direct and nuanced, and intermediate effects of digital progress on energy deprivation. Key findings revealed a significant reduction in EP attributed to the advancements in DE, with the most notable improvements observed in Eastern China where strategic energy policies and management practices enhanced the positive impacts of digitalization. The study highlighted the DE's role in improving energy access, efficiency, and environmental sustainability, although it also pointed out the potential for regressive effects in areas with lower levels of technological advancement. These findings are of substantial value as they offer empirical evidence of the DE's capacity to alleviate EP, underlining the importance of integrating digital strategies into energy policy planning. The research provides critical insights for policymakers, stakeholders in the energy sector, and scholars interested in the synergies between digital innovation and energy security, suggesting that leveraging digital technologies could accelerate efforts towards achieving sustainable energy access and combating energy poverty in China and potentially in other contexts facing similar challenges.

Impact of Green Infrastructure Investment on Urban Carbon Emissions in China

Given the increasingly severe global climate change, the reduction in urban greenhouse gas emissions has become the common goal of all nations. As a widely concerned sustainable development strategy, green infrastructure investment (GII) aims to reduce urban carbon emissions, improve the efficiency of resource utilization, and improve environmental quality. However, the construction cycle of green infrastructure is long, and the construction process itself may produce carbon emissions; so, the final effect of GII on urban carbon emissions is unclear, which deserves our in-depth study. Further, is this effect having a time-lag effect? Is there only a simple linear relationship between GII and urban carbon emissions? Based on panel data from 235 Chinese cities from 2006 to 2019, this study conducted an econometric regression analysis using time-lag-effect and threshold-effect models. The results showed the following: (1) GII had a negative inhibitory effect on urban CO2 emissions. Adding one unit to the GII could reduce urban CO2 emissions by 0.032 units. (2) GII exhibited a time-lag effect on urban CO2 emissions, and the greatest reduction in CO2 emissions occurred in the third lag period. (3) GII had a threshold effect on urban CO2 emissions based on technological progress (TP). This paper used the static and dynamic panel threshold models to research separately, and obtained the corresponding regression results. In the static panel, the double threshold values for TP were 3.9120 and 6.8035. At different TP levels, GII had an inhibitory effect on CO2 emissions, but the coefficients were different. However, in the dynamic panel, the threshold value was 3.666. The threshold changed over time and the effect of GII on CO2 emissions shifted from facilitation to inhibition.

Debt, economic growth and threshold effects: Evidence from developing countries

PurposeMost empirical papers on threshold effects between debt and growth focus on developed countries or a mix of developing and developed economies, often using public debt. Evidence for developing economies is inconclusive, as is the analysis of other threshold effects such as those probably caused by the level of relative development or the repayment capacity. The objective of this study was to examine threshold effects for developing economies, including external and total debt, and identify them in the debt-growth relation considering three determinants: debt itself, initial real Gross Domestic Product (GDP) per capita and debt to exports ratio.Design/methodology/approachWe used a panel threshold regression model (PTRM) and a dynamic panel threshold model (DPTM) for a sample of 47 developing countries from 1970 to 2019.FindingsWe found (1) no evidence of threshold effects applying total debt as a threshold variable; (2) one critical value for external debt of 42.32% (using PTRM) and 67.11% (using DPTM), above which this factor is detrimental to growth; (3) two turning points for initial GDP as a threshold variable, where total and external debt positively affects growth at a very low initial GDP, it becomes nonsignificant between critical values, and it negatively influences growth above the second threshold; (4) one critical value for external debt to exports using PTRM and DPTM, below which external debt positively affects growth and negatively above it.Originality/valueThe outcome suggests that only poorer economies can leverage credits. The level of the threshold for the debt to exports ratio is higher than that found in previous literature, implying that the external restriction could be less relevant in recent periods. However, the threshold for the external debt-to-GDP ratio is lower compared to previous evidence.

How aging impacts environmental sustainability—insights from the effects of social consumption and labor supply

Population aging is discreetly reshaping the dynamics of social demand and labor supply, introducing potential turbulence to global carbon emissions. Understanding the impact of aging on carbon emissions is imperative for steering the next phase of sustainable development. This study, focusing on China, the world’s largest carbon emitter, delved into the intricacies of how population aging influences carbon emissions using a dynamic panel threshold model and a mediated effects model. Geographic heterogeneity within China was also considered. On the one hand, this study incorporated three consumer-side intermediation mechanisms: energy consumption, residential consumption and medical consumption. It was found that the positive driving effect of consumption-side variables on carbon emissions was characterized by an inverted “U”-shaped change in China’s highly aging regions, while an asymptotic upward trend of 7.65% was observed in regions with moderate and low aging. On the other hand, this study scrutinized three supply-side mediating mechanisms: industrial structure, R&D innovation and labor supply. The mechanism of supply-side variables on carbon emissions exhibited a shift from robustly positive driving to more nuanced weak positive driving or even negative inhibiting in highly aging regions, while inhibiting effects dominated in regions with moderate and low aging. This study offers a dual perspective encompassing both the production and consumption sides, which lays a foundation for exploring the internal mechanism of aging on carbon emission.

A dynamic panel threshold model analysis on heterogeneous environmental regulation, R&D investment, and enterprise green total factor productivity

Environmental regulations are important means to influence manufacturing enterprise green development. However, there are two completely different conclusions both in theoretical and in empirical research, namely the “Follow Cost” theory and the “Porter Hypothesis”. The nonlinear mechanism needs to be considered. Therefore, this study aims to explain the threshold impact of heterogeneous environmental regulations on enterprise green total factor productivity. Environmental regulations are divided into different sub-categories, then based on the panel data of 1220 Chinese manufacturing listed companies from 2011 to 2020, this paper uses threshold regression model to examine the impact of heterogeneous environmental regulations on Chinese manufacturing enterprise Green Total Factor Productivity. The empirical results show that: (1) Command-controlled, market-incentive and voluntary-agreement environmental regulation all have a significant nonlinear impact on enterprise Green Total Factor Productivity. (2) Enterprise R&D investment plays a threshold role in the impact. (3) There are industry and equity type differences in the impact process. This study focuses on the micro level of enterprises and tests the threshold mechanism, which make some theoretical complement to previous researches. The research results are not only beneficial for the government to propose appropriate environmental regulatory policies, but also for enterprises to achieve green growth through heterogeneous R&D investment.

FDI–Growth Nexus in Emerging Economies: Role of Financial Sector Development

This paper examined the relationship between foreign direct investment (FDI) inflows and the growth rate in emerging and developing economies (EMDEs) and whether the development of the financial sector affects the growth-effect of FDI inflows for these economies. FDI enhances capital accumulation in the economy, and the level of financial sector development (FSD) affects the financial intermediation of funds, thereby enhancing the absorptive capability from investment. Using the dynamic panel threshold model (DPTM) for a balanced panel of 71 countries over the period 2000–2019, the paper finds a U-shaped relationship between the measures of FSD and the growth rate of an economy and does not find evidence for the ‘vanishing effect of finance’ for EMDEs. The growth-enhancing effect of FDI is much stronger for countries with a higher level of FSD. Our estimation techniques control for cross-sectional dependence and endogeneity in the case of a dynamic framework. The robustness results estimated using four-year non-overlapping averages as an observational unit support the findings. JEL Codes: F23, F36, O16

Economic growth effects of public health expenditure in OECD countries: An empirical study using the dynamic panel threshold model

BackgroundMember countries of the Organization for Economic Co-operation and Development (OECD) have experienced a downward trend in capital and macro investment returns. Countries rely on investments in healthcare and health-related sectors to ensure continuous input and an efficient labor market. Public healthcare coverage is a social welfare policy implemented by governments, which contributes to improving human capital quality and ensuring stable economic growth. MethodsThis study employs a method that combines theoretical modeling and empirical testing examining 33 OECD countries from 2001 to 2017. We first construct a nonlinear dynamic panel threshold model to examine the impact of public health spending on economic growth. We then employ the model to empirically analyze the threshold effect of public health expenditure on economic growth, validating the effectiveness of our theoretical model. ResultsWhen the level of household consumption is below the 9.63 threshold, the effect of public health expenditure on economic growth is significantly negative (p < 0.1); however, when consumption exceeds the 9.63 threshold, the effect becomes significantly positive (p < 0.05). Similarly, when employee wages are below the 10.57 threshold, the effect of public health expenditure on economic growth is significantly negative (p > 0.1), and it becomes significantly positive when it exceeds 10.57 (p < 0.5). Finally, when the level of physical capital investment falls below the 8.73 threshold, the effect of public health expenditure on economic growth is significantly negative (p < 0.5), and it becomes significantly positive when it exceeds 8.73 (p < 0.5). The positive impact of public health expenditure on economic growth gradually strengthens as household consumption, employee wages, and per capita physical capital investment continue to rise. ConclusionsIn an economic environment with higher household consumption, employee wages, and physical capital investment, public health expenditure will significantly promote economic growth.

Social expenditure composition and inequality: A dynamic panel threshold analysis for OECD countries

This paper studies the relationship between inequality and public social spending for an overall sample of 28 OECD countries spanning 1997 to 2017. We add to the literature by dissecting social expenditure according to nine programs and allowing for the existence of a non-linear relation in the context of a dynamic panel threshold model. The analysis reveals a positive contribution of old-age pensions to the Gini index of disposable income distribution, the most often used indicator of inequality, supporting the need to rethink old-age pension systems in this group of countries. The results for the other social expenditure components vary with the inequality measure used and country groups under analysis, highlighting the problems that may be associated with panel data even when a set of countries with many characteristics in common is used. Our results also stress the relevance of accommodating nonlinearities when explaining inequality, paving the way to a better understanding of its behaviour.

Can digital economy truly improve agricultural ecological transformation? New insights from China

AbstractAs the world’s biggest emitter of carbon, China’s agricultural carbon emissions account for 16 to 17%, with agriculture being the second largest contributor to carbon emissions. The development of the digital economy has brought profound changes to agricultural ecology. Therefore, we utilize China’s data experience to construct an agricultural ecological transformation system by setting up a Super-SBM model. Then, based on a dynamic panel threshold model, we explore the nonlinear impact mechanism of the digital economy on agricultural ecological transformation from a low-carbon innovation perspective. Our results reveal that the overall level of China’s agricultural ecological transformation is not high, but in the long-term posture, it represents a relatively steady upward trend, with a significant “wealth gap” between different regions. It is worth noting that there is a significant threshold effect of low-carbon innovation heterogeneity in the impact mechanism of digital economy on agricultural ecological transformation: under lower low-carbon innovation levels, the development of digital economy is unable to effectively promote agricultural ecological transformation. However, as the level of low-carbon technological innovation increases and exceeds the critical value, it stimulates the driving effect of digital economy to some extent, thereby promoting the improvement of agricultural ecological transformation, presenting a “U” shaped relationship. The paper has clarified the differential “new phenomena” in the process of promoting agricultural ecological transformation, providing new insights for achieving “carbon reduction and economic promotion” in developing countries.

How Global Macroeconomic Uncertainty Affects the Equity Risk Premium

This paper introduces a new measure for global macroeconomic uncertainty that captures both upside and downside risks using a no-arbitrage asset pricing framework. The study uses a dynamic panel threshold model to analyze quarterly data from 20 countries between 1996 and 2020, incorporating macroeconomic and financial market variables, as well as risk aversion factors. The findings reveal a significant nonlinear effect of global uncertainty on stock risk premiums. High global uncertainty increases the premium investors require for global market risks but decreases it for local market risks. The study also indicates that during uncertain times, investors display risk-averse and liquidity-seeking behavior, opting for safer and more liquid assets. The impact of global macroeconomic uncertainty on stock risk premiums is found to be long-lasting.

Impact of different geopolitical factors on the energy transition: The role of geopolitical threats, geopolitical acts, and geopolitical risks

In order to better understand the impact of different geopolitical factors on energy transition, the impact of geopolitical threats (war threats, peace threats, military buildups, nuclear threats and terror threats), geopolitical acts (beginning of war, escalation of war and terror acts), and geopolitical risks on energy transition were systematically investigated. Green technologies, natural resource rents and trade openness were incorporated into the analytical framework, and a dynamic panel threshold model was utilized to explore the impact of geopolitical risks on energy transition across different income levels. To this end, data on geopolitical threats, geopolitical acts, geopolitical risks, energy transitions and other key social economic factors for 38 countries from 2000 to 2022 were collected. The heterogeneity simulation results show that there is a negative correlation between geopolitical threats, geopolitical acts, geopolitical risks and energy transition. Moreover, geopolitical threats have more significant hindrance to the energy transition than geopolitical acts. The results of the nonlinear panel simulation show that there is a double threshold effect of geopolitical risks on energy transition. When geopolitical risk crosses the threshold (0.5197), the coefficient decreases to −0.29, which means that the rising geopolitical risk increases the inhibition on energy transition, and the inhibitory effect is slightly weakened after a certain level. Finally, policy implications are offered.

Closing the clean cooking gap: Which policies and institutional qualities matter?

Access to clean energy is vital for fostering economic development and promoting shared prosperity. Yet, billions of people in the developing world continue to lack access to clean cooking fuels and technologies, creating a growing clean cooking gap. Achieving universal access to clean cooking requires integrated policies and quality institutions. However, attempts to examine the policies and institutional qualities that matter are missing. We take up this task and study the role of public policies and institutional qualities in closing the clean cooking gap using a generalized method of moment and a dynamic panel threshold model for 65 developing countries covering the period between 2005 and 2022. Our result confirms that economic management policies and policies for social inclusion and equity were critical to closing the clean cooking gap. Also, structural policies, except for a few dimensions, were found to minimize the clean cooking gap. However, we find an unintended adverse effect of a strict public sector management and institution on the clean cooking gap. Our study recommends the need for targeted interventions involving subsidies, tax incentives, and credit guarantees carried out under a flexible regulatory framework.

Effect of Tax Rates on Industrial Profits on Industrial Production in Sub-Saharan Africa

This paper analyses the effect of the tax rate on industrial profits on industrial production in sub-Saharan Africa. A Seo and Shin dynamic threshold panel model was specified and estimated for this purpose. Using data from the World Bank (WDI) over the period 2005–2021, the results from the estimation of the dynamic threshold model show that there is a threshold from which the effect of the tax rate on profits of industries becomes negative on industrial value added. This is a threshold of 20,47% of the tax rate on industrial profits. Beyond this threshold, the effect of the rate of this type of tax becomes negative on industrial production in Sub-Saharan Africa, precisely in the 25 countries taken into account in this study. The study therefore recommends the implementation of policies favourable to broadening the tax base and moderate tax rates.

Pollution, governance, and women's work: Examining African female labour force participation in the face of environmental pollution and governance quality puzzles

In a rapidly changing world marked by environmental degradation and governance disparities, understanding their impact on African women's participation in the labour force remains a critical puzzle. This research seeks to unveil the intricate connections between pollution, governance quality, and women's economic engagement in Africa, shedding light on vital pathways to empower women, mitigate pollution's impact, and drive sustainable development in the region. Specifically, this study evaluates the impacts of governance quality and environmental pollution on gender economic outcomes in Sub-Saharan Africa (SSA) using data from 28 nations spanning 1996 to 2020. The study employs the dynamic panel threshold model. The key results reveal a negative and significant influence of ecological footprint on female economic participation. Furthermore, the dynamic threshold analysis reveals that environmental degradation undermines female labour engagement irrespective of the threshold level. The study also showed that below the threshold level, the interaction between governance quality variables and the ecological footprint exacerbates the negative impact of the ecological footprint on women's economic participation. Above the threshold level, the interaction between governance quality variables and the ecological footprint mitigates the negative impact. Overall, key recommendations like improved pollution control measures, inclusive governance, and effecting targeted policies and programs to empower women economically, among others, are proffered to contribute to the improvement in governance, environmental sustainability, and gender economic outcomes in SSA.

Effect of renewable energy on economic growth in sub‐Saharan Africa: Role of institutional quality

AbstractThe development of renewable energy is considered as an important step toward sustainable development. In sub‐Saharan African (SSA) countries, institutional quality can play an essential role in encouraging investment and implementation of policies favoring renewable energy. This paper examines the role of institutional quality in the effect of renewable energy on economic growth across 25 SSA countries from 2002 to 2018. The results from the dynamic panel threshold model reveal a significant threshold effect of institutional quality on the contribution of renewable energy to economic growth. While renewable energy consumption positively contributes to economic growth, its impact is notably amplified when the institutional quality index, set at 0.304, is above the threshold. Our findings remain robust when altering institutional quality indicators. In terms of economic implications, improving overall institutional quality by promoting good political, economic, and institutional governance could significantly increase the contribution of renewable energies to economic growth in SSA countries.

The impact of inflation on BRIC (countries): a dynamic panel threshold model evidence

The impact of inflation on BRIC (countries): a dynamic panel threshold model evidence

The nonlinear relationship between financial constraints and R&amp;D investment: the mediating role of executive stock options

PurposeThe current study aims to investigate the mediating role of executive stock options in the nonlinear relationship between financial constraints and research and development (R&amp;D) investment through two measures of financial constraints.Design/methodology/approachThis study is based on a sample of 90 French firms for the period extending from 2008 to 2020. The authors employ a panel threshold method to analyze whether the impact of financial constraints on R&amp;D investment depends on the level of financial constraints or not.FindingsUsing SA index (Hadlock and Pierce, 2010) and FCP index (Schauer et al., 2019) as measures of financial constraints, the authors demonstrate that the relationship between financial constraints and R&amp;D investment is nonlinear. Moreover, the authors find that executive stock options mediate partially the relationship between financial constraints and R&amp;D investment. More specifically, the authors show that stock options could play two roles depending on the level of the financial constraints; inconsistent mediation for firms with low/medium level of financial constraints and partial mediation for highly constrained firms.Originality/valueThis paper is the first to the best of the authors' knowledge to investigate the nonlinear relationship between financial constraints and R&amp;D investment as well as the mediating role of executive stock option using dynamic panel threshold models.

Impact of political risk and economic growth on the tourism industry: Evidence from a dynamic threshold panel model

This paper analyzes the nonlinear impact of political risk and economic development on tourism revenues. A dynamic threshold panel model is applied to a sample of 119 countries over 8 years. A positive association between economic development and tourism revenues is identified. The results also show that the impact of improvements in political stability on growth in tourism revenues is dependent on the current level of economic development. For highly developed countries, increased political stability does not impact tourism revenues. However, there is a significant positive impact of improved political stability on tourism revenues for less-developed countries.

Threshold effect and mechanism of tourism industrial agglomeration on green innovation efficiency: Evidence from coastal urban agglomerations in China

The tourism industry plays an important role in the economic development of coastal urban agglomerations. Examining the influence of tourism industrial agglomeration on green innovation efficiency is vital for promoting sustainable development in coastal urban agglomerations. Nevertheless, there is limited evidence regarding this influence and its mechanism in the context of China. Based on the panel data covering 48 cities in coastal urban agglomerations in China from 2001 to 2021, this paper investigates the threshold effect of tourism industrial agglomeration on the green innovation efficiency of the tourism industry and the mechanism of tourism industrial structure upgrading via a dynamic panel threshold model and mediating effect model. The findings reveal an inverted U-shaped threshold effect of tourism industrial agglomeration on the green innovation efficiency of the tourism industry, which changes from positive effect to negative effect. Furthermore, tourism industrial structure upgrading partially mediates the threshold effect. Theoretically, this paper expands the understanding of the green innovation efficiency of the tourism industry from the perspective of agglomeration. Practically, it provides policy recommendations for governments to promote green innovation development of the tourism industry in coastal urban agglomerations.