Fixed Effects Estimation Research Articles

Economic Complexity and Sectoral Performance in Africa: The Role of Economic Governance Institutions

ABSTRACTIn line with earlier research on economic development, which viewed development as a process of structural modification of the productive structure, this study concentrates on economic complexity and its role in the developmental process. We studied how economic complexity and economic governance institutions affect sectoral performance in Africa, and how economic governance institutions are moderating the economic complexity‐sectoral performance nexus in the region. The study covered a sample of 30 African countries over the period 2010–2021, and used both the dynamic system GMM and the Driscoll and Kraay (1998) standard errors fixed effect estimation techniques. We find that economic complexity and economic governance institutions individually have negative unconditional effects on the agricultural, manufacturing, and services sectors in Africa. We also find that economic governance institutions on the continent failed to moderate the adverse effect of economic complexity on sectoral performance. These findings indicate that the low level of economic complexity in African economies and the weak governance institutions that have plagued the continent have both contributed to its poor sectoral performance. In line with these findings, we provided policy recommendations, which emphasized the need for economic diversification and governance institutional reform in Africa.

Economic benefits of new broadband network coverage and service adoption: evidence from OECD member states

Abstract A broad-scale rollout and adoption of new broadband networks and services, respectively, are expected to generate innovative services for consumers and create a high potential for productivity increases and economic growth. However, there is no evidence available on the causal impact of both broadband coverage and adoption on economic outcomes, which we measure as gross domestic product (GDP). Moreover, no study has yet simultaneously considered the impact of both new wireline broadband based on fiber-optic technologies and wireless (mobile) broadband based on 3G+/4G technologies. Distinguishing these effects is of crucial relevance for the efficient design of broadband policies. To provide reliable evidence on causal effects, we utilize comprehensive panel data for 32 Organisation for Economic Co-operation and Development (OECD) countries for the years 2002–2020 and panel fixed-effects estimators including instrumental variables estimation. Our results show that both fixed and mobile broadband adoption exert a substantial and significant impact on GDP, while network deployment per se exhibits only minor multiplier-related effects on GDP per capita. Contemporaneous effects of a 1% increase in fixed broadband adoption impact GDP per capita growth in a range of 0.026–0.034%, while a 1% increase in mobile broadband adoption contributes between 0.092% and 0.102%. While the impact of contemporaneous mobile broadband adoption is substantially higher, fixed broadband adoption shows stronger dynamic and cumulative effects, as well as larger effects in later deployment periods. Generally, our results are consistent with the notion that the adoption of technologies to substantial proportions of the population is most important in driving economic growth.

The role of institutional quality, education and fertility in shaping female labour force participation: evidence from selected Asian countries

This study analysed the role of institutional quality, education and fertility in female labour force participation across a panel of 36 Asian nations, while also investigating the interacting impacts of these variables. The Driscoll and Kraay Fixed Effects Estimator was used to analyzed annual data from 1996 to 2021, ensuring strong and efficient results, especially in cross-sectional dependence. The findings uncovered in the research shows that fertility rates were observed to adversely affect female labour force participation in all models, although education exhibited a beneficial impact. The influence of institutional quality on female workforce participation differed markedly based on the particular institutional measure employed. The interactions between fertility rates and indices of institutional quality positively influenced female labour force participation, whereas the interaction between education and institutional quality exhibited more intricate dynamics. The report recommends a more comprehensive, context-specific policy strategy to improve female labour force participation in the region.

Động cơ tích lũy dự trữ ngoại hối: Bằng chứng thực nghiệm tại các quốc gia đang phát triển

Using two way fixed effects estimation with data from 77 developing countries for the period 2000 2022, the article provides evidence that foreign exchange reserve accumulation comes from both motives: mercantilism and insurance, in which the insurance motive has the greater influence. The exchange rate regime and the level of financial openness are two factors that change the level of influence of accumulative motives of foreign reserves. The impact of exchange rates on foreign exchange can be in opposite directions among different exchange rate regimes. Countries with high financial openness are often more concerned with the internal liquidity reserve motive, on the contrary, countries with low financial openness are more likely to accumulate reserves for mercantilism. The research results provide an important policy implication for developing countries, including Vietnam, on the need to calculate and maintain the optimal scale of foreign reserve to ensure multiple management goal, and at the same time consider the characteristics of the exchange rate regime and the openness of the capital account of the economy itself.

Financial soundness and subjective financial well-being: Do government policies matter?

Does government policy intervention enhance citizens’ financial well-being, particularly when considering the increased financial soundness attributed to the private sector? This study empirically addresses this question, using data from more than 200,000 individuals worldwide. To provide causal evidence, we employ a two-stage least squares (2SLS) ­approach with a high-dimensional fixed-effect estimator, which captures multiple levels of control and addresses endogeneity concerns. Our findings suggest that (i) improvements in financial soundness — proxied by domestic credit development — significantly ­increase financial satisfaction, whereas (ii) surprisingly, government interventions, whether in the form of policies tightening or loosening, tend to erode this positive effect. This outcome may reflect either (i) ineffective interventions or (ii) the government ­serving as a scapegoat for a decline in subjective financial well-being. Our findings imply that to optimize public satisfaction, governments should approach interventions in the private sector with caution, thereby strengthening government legitimacy.

Corporate governance and emission performance: Malaysian evidence on the moderating role of environmental innovation

This study examines the effects of corporate governance mechanisms on emission scores. Furthermore, it evaluates the moderating effect of environmental innovation activities on the association between corporate governance mechanisms and emission performance. The sample consists of 122 Malaysian companies in several sectors. Data were extracted exclusively from the Refinitiv Eikon database for the period 2016–2023. This study adopted a panel data approach with a fixed-effect estimation, fixed effect with the Driscoll–Kraay standard error, and a generalized method of moments. The findings reveal that audit expertise, audit independence, board expertise, and board-specific skills have a statistically significant negative impact on emission performance. Furthermore, the results show that environmental innovation has no substantial moderating effect on the links between audit committee characteristics and emission performance. However, environmental innovation moderates the association between board attendance, gender diversity, and emission performance. This study makes several valuable contributions to the existing body of literature. Our study offers a distinct and thorough assessment of board and audit committee characteristics and environmental innovation, setting it apart from the previous research conducted in Malaysia.

Absentee Ownership and Rental Affordability: Evidence from Commuting Zones

In this paper, we examine the intersection of financialization, wealth inequality, and the housing market in the United States with an emphasis on the relationship between absentee ownership and declining rental affordability. At the same time as financialization has increasingly transformed the market for residential real estate into a vehicle for financial speculation, households at the bottom of the income distribution have been disproportionately affected by rising rents and declining housing affordability. Using data from the decennial Census and the American Community Survey from 1990 to 2020, we investigate the link between absentee ownership and rental affordability across US commuting zones. Panel fixed-effects estimates suggest a 10 percentage-point increase in absentee ownership results in a 6.7% increase in average rent, a 1.6 percentage-point increase in the ratio of median commuting zone rent to median commuting zone income, and an approximately 1.4 percentage-point increase in the share of households in a commuting zone that are rent burdened. These effects are concentrated in commuting zones with large non-white populations, and are particularly severe in commuting zones with a large share of black non-Hispanic residents. Our findings contribute to the understanding of how financialization and absentee ownership exacerbate housing affordability issues in marginalized communities and urban areas in the economic periphery, shaping the urban affordability landscape in locations beyond ‘first-tier’ global cities.

Impact of Innovation and Trade Participation on Economic Growth Among Selected African Countries

This study examines the impact of innovation and trade participation on economic growth among selected African countries from 1996 to 2021. This study applied nonstationary heterogeneous panel models utilizing pooled mean group estimators, mean group estimators and dynamic fixed effects estimators. Based on the results of the Hausman test, the PMG estimator was considered for the data analysis. The study revealed the significant role of industrial design, patents, trademarks, research and development, exports, and balanced trade policies in driving long-term economic growth in Africa. The synergies between innovation and trade participation are studied, emphasizing their amplified impact on economic growth. The study suggests practical policy recommendations for the selected African countries, urging governments to establish innovation ecosystems, encourage investments in design, strengthen intellectual property protection, prioritize infrastructure development, and develop balanced trade policies. Focusing on SMEs, offering incentives for research and development, and establishing trade promotion agencies are also recommended to create a conducive environment for innovation, trade, and sustained economic growth.

Impact of corporate governance structure on performance of listed firms: empirical evidence from Palestine

PurposeThe purpose of this study is to investigate the influence of corporate governance structure corporate governance on a firm’s performance in the Palestinian business environment between 2016 and 2023. The specific environment of the developing Palestinian economy is the main motivation and emphasis of this investigation.Design/methodology/approachData were gathered from 49 financial and non-financial firms listed on the Palestine Stock Exchange between 2016 and 2023. While the random and fixed effects estimates were utilized to be the most suitable for this particular investigation, they were used to undertake the data analysis procedure. The study employed two-stage least squares (2SLS) to assess the robustness and correctness of data to bolster the findings and subsequent implications.FindingsThe findings show that the return on equity, a measure of corporate performance, was positively but not significantly impacted by the presence of women on the executive boards of Palestinian companies. This suggests that the variable in question had no bearing on the success of the firms. In terms of moderating influence, corporate governance structure had no bearing on the link between dual chief executives, institution ownership, government ownership, independent directors and firm performance. Family ownership and board size had negative, significant impacts on performance.Research limitations/implicationsThe research limitations of this study are that it focuses exclusively on manufacturing firms listed on the Palestine Exchange (PEX) over a seven-year period, which limits its generalizability to other industries and regions. Furthermore, due to a lack of data, the model did not account for global diversity on boards of directors.Practical implicationsThe findings of this research help managers understand how management structures impact business success and provide regulatory authorities with insights into gender diversity and corporate governance legislation in Palestine. It suggests enhancing company performance, competitiveness and capital acquisition by improving governance information quality, building investor confidence, raising standards and reforming governance systems.Originality/valueThis study contributes to the literature by enhancing the understanding of how corporate governance and gender diversity affect the financial performance of listed firms, addressing a research gap in the Palestinian market. It is one of the few studies examining company performance during political turmoil, specifically focusing on the increased role of women on Palestinian boards.

Digital infrastructure and cognitive ability of children

Digital technologies have become an integral part of most children’s lives, significantly influencing their development. This study takes the Broadband China Pilot Policy as a quasi-experiment, using the data from China Family Panel Studies (CFPS) to analyze the effects of digital infrastructure on children’s cognitive ability. The extended two-way fixed effects estimator was employed to conduct the Staggered Difference-in-Differences estimation. The findings indicate that the average treatment effect of treatment group of “Broadband China” is significantly positive on children’s cognitive ability. Additionally, heterogeneities of gender and urban-rural were found: (1) The Broadband China policy had a significant positive impact on boys only; (2) The policy had a greater and more significant impact on the word test scores results of urban children; (3) The policy had a negative impact on the math test scores of urban children, while showing a positive impact on the math test scores of rural children. Finally, the paper makes the following recommendations: (1) Digital infrastructure development should be emphasized; (2) More emphasis should be placed on rural areas when building digital infrastructure; (3) Gender differences should be considered when formulating policies to help girls benefit from digital technologies.

Impacts of fiscal stress labels on student achievement and achievement gaps

AbstractThis paper considers the effects of Ohio fiscal stress labels on student achievement and achievement gaps. We estimate data on math and English Language Arts achievement and achievement gaps in school districts from 2009 to 2018. Two‐way fixed effects estimates indicate that student achievement declines by between 0.038 and 0.048 standard deviations when their schools receive a fiscal stress label designation, although these effects become insignificant when using stacked differences‐in‐differences. We find that fiscal stress label receipt leads to a statistically significant closing of the White–Black achievement gap, but find more negligible changes in the achievement gaps across gender and socioeconomic groups.

Impact of Women's Empowerment on Female Account Ownership: A Case Study of Selected Sub-Saharan African Countries (2011 – 2021)

This study investigated women's empowerment and its impact on female account ownership, using selected sub-Saharan African countries as a case study from 2011 to 2021. The central research question covers whether women's empowerment has any impact on the financial inclusion of women in sub-Saharan Africa, with an emphasis on account ownership by women as a yardstick to measure financial inclusion. The selected women empowerment variables comprised the percentage of the total labour force, namely female labour force (FLF), equality in the rights to ownership of property (EOR), non-discrimination of women in employment (NDW), choice of where to live by women (CWL), mean years of schooling of females (MYS), and women political empowerment (WPE). By means of pooled ordinary least square regression, using the fixed effects estimation model applied to the panel data from 38 sub-Saharan African (SSA) countries with available data for the period 2011 to 2021, as reported on the three-yearly database, this research was able to establish the impact of some of the selected variables of women empowerment on female account ownership in SSA. This study hinges on the undeniable potential of women to lift Africa from multi-dimensional poverty since a greater proportion of household consumption is contributed by the income of women rather than men in Africa. The authors, therefore, recommend, among others, that African governments should invest in policies that will encourage gender equality and women's emancipation to boost women's empowerment, which is the gateway to enhanced financial inclusion of African women and the attendant gain of accelerated poverty reduction in Africa.

A Research Note on Maternity Leave and Children's Outcomes: The Case of Parental Teachers

This research note examines the long-term effect of female teachers’ longer maternity leave on children's education and disability in Vietnam. Having a child a few months before or just after the summer vacation can increase paid leave for female teachers. Using variation in months of childbirth and applying difference-in-differences with family fixed-effect estimators, I find that female teachers in Vietnam tend to avoid giving birth during summer vacation. In the long run, longer maternity leave is positively associated with their children's education and negatively associated with the probability of child disability.

Religion as an informal institution: A case of true pure land Buddhism and missing women in early modern Japan

In early modern Japan, infanticide was used for birth control and sex selection. However, some historians hypothesized that people who believed in the True Pure Land (TPL) sect of Japanese Buddhism were less likely to commit infanticide. I statistically examine this hypothesis using a quasi-natural experiment of hinoeuma (fire-horse) year with a two-way fixed-effects estimation. Girls born in a hinoeuma year were reckoned to be inauspicious and subjected to sex-selective infanticide. In 1846 and 1906 hinoeuma, TPL-dominant areas experienced a smaller increase in the male-to-female ratio in the cohort than the areas with less TPL dominance. Additional regressions support the hypothesis that the TPL’s prohibition of infanticide led to this smaller effect.

Impact of ESG performance on financial risk in energy firms: evidence from developing countries

Purpose This study aims to examine the impact of ESG performance on financial risk (FR) in energy firms from developing countries. It also explores the moderating roles of ESG controversies and board gender diversity (BGD) on this relationship. Design/methodology/approach The research uses a panel data set of 218 energy firms from 20 developing countries from 2019 to 2024, using two-stage least squares regression to address potential endogeneity. Robustness checks are conducted using fixed-effects estimation and pooled ordinary least squares. Findings The results indicate that superior ESG performance significantly reduces both total and systemic risk. ESG controversies positively moderate the relationship between ESG performance and FR, suggesting that controversies may weaken the risk-reducing benefits of strong ESG practices. Additionally, BGD significantly strengthens the negative relationship between ESG performance and FR. Robustness checks confirm the consistency of these findings across different estimation methods. Originality/value This study contributes to the growing body of literature by examining the role of ESG performance in FR mitigation, specifically within the energy sector in developing countries. To the best of the authors’ knowledge, this is the first research to explore these dynamics in this specific context. This study uniquely illustrates how ESG controversies and BGD significantly moderate the ESG–risk relationship, offering fresh insights that extend stakeholder, risk management and legitimacy theories. The findings highlight the importance of integrating ESG factors into corporate governance and risk management, particularly for firms operating in high-risk, high-impact industries such as energy.

Does National Insecurity Motivate Ambiguous Financial Reporting? An Insight Into Terrorism

ABSTRACTTerrorism brings forth social disorder and obstructs economic activities at both macro‐ and micro‐level. This study examines the quality of corporate financial reporting under the influence of terrorism among U.S. listed firms. Using the fixed effect estimator in a sample stretching from 2007 to 2020, I document that firms employ greater accruals in the face of terrorism, and accruals extend in both directions. This negative association stay robust with different model specifications and endogeneity diagnoses. The state‐level analysis supports this inverse relationship by revealing a larger decline in earnings quality among firms located in states where terrorist attacks take place. The channel analysis shows that corporate monitoring efforts, including board diligence, ethical values, and market attention, serve as a channel which transmits the impact of terrorism to corporate earnings quality. Additionally, economic sanction imposition from the U.S. government also curtails the detrimental effect of terrorism on firms' earnings quality. This study's findings shed light on corporate responses to terrorism threats through the financial reporting lens and suggest some implications as well as future research directions for interested scholars.

The impact of financial development on OFDI: Based on GMM estimates

In this study, we use panel data from 2010 to 2019, covering a sample of 64 countries, including developing and developed economies. This study provides an in-depth exploration of the impact of financial development on foreign direct investment (OFDI) by applying four different estimation methods, namely hybrid ordinary least squares (OLS), fixed effects estimation, random effects estimation, and systematic generalized method of moments (GMM). Impact. Investors from the source country plan and conduct direct investments in foreign countries, representing the cross-border flow of direct investment (OFDI). We measure financial development through three indicators: economic growth scale, financial product structure composition, and financial development efficiency. Our results reveal a consistent positive relationship between all dimensions of financial development and OFDI. In addition, we introduce country-specific dummy variables to stratify the analysis between developing and developed countries. Our empirical results highlight the statistical significance of these dummy variables, indicating clear differences in OFDI patterns between the two categories of countries. On this basis, this article examines developing and developed countries, respectively, and draws different conclusions. This study reveals that the impact of financial development on OFDI is significantly different in developing and developed countries, and provides new evidence on the growth of OFDI in developing countries to support this theory. The findings of this study can better provide a reference for governments in developing countries to formulate policies.

Loan growth drivers in state-owned banks: A fixed effects model approach

Loan growth is a critical driver for economic development, and comprehending the determinants affecting lending in state-owned banks is vital for enhancing financial sector stability and performance. This paper examines the factors that affect loan growth in state-owned banks in Bangladesh. We collected data over a 11-year period from 2012 to 2022. We applied ordinary least square method primarily followed by fixed effect estimation. To check the validity of the regression models of the study, we have considered several diagnostic tests. Our findings indicate that loan growth in state-owned banks is influenced by several industry-dependent variables i.e. size, liquidity, efficiency, non-performing loans, etc. The influence of bank size, income, liquidity, non-performing loan ratio, and cost-to-income ratio is the main emphasis of this study's investigation into the factors influencing bank lending. According to the statistics, there is a significant positive correlation between size and lending. Bank liquidity and lending show a strong negative correlation. The study also found higher lending is associated with higher non-performing loans significantly. The efficiency ratio shows a substantial negative impact on lending. To improve bank performance and stability, policymakers and bank management may benefit greatly from these results. Policymakers need to integrate various macroeconomic and qualitative elements into regulatory frameworks to bolster financial stability while facilitating sustainable loan expansion. Bank management can enhance efficiency by decreasing the cost-to-income ratio and strengthening credit risk management, while utilizing bank size for strategic expansions to increase lending capacity.

Revitalizing Agricultural Economy Through Rural E-Commerce? Experience from China’s Revolutionary Old Areas

Many of the world’s less developed regions may not be able to improve the well-being of rural residents through agricultural revitalization because of their remoteness from agricultural markets. Using the county-level data set of China’s underdeveloped old revolutionary base areas from 2010 to 2021, this paper takes the policy planning of rural e-commerce as event intervention to investigate the driving role of the digital product market on agricultural economic development. Empirical results show that rural e-commerce planning policy has significantly promoted the agricultural added value of the pilot counties, and the digital market is the key driving factor of the agricultural economic growth in these underdeveloped areas. Both food production and livestock output have increased significantly as a result of e-commerce policies. Considering the potential bias of the bidirectional fixed effect estimators of staggered differences-in-differences (DID), this study uses heterogeneous robust estimators to verify the growth effect of the agricultural economy. Specifically, digital agricultural markets have significantly promoted agricultural mechanization and significantly improved agricultural total factor productivity. Moreover, empirical evidence does not support transmission mechanisms for off-farm employment and agricultural entrepreneurship. The findings can help less developed countries and regions develop policies to expand the agricultural markets with digital dividends, thereby promoting the development of the agricultural economy.

Intellectual property protection intensity and regional technological innovation structure: Based on the perspective of economic complexity theory

Exploring the intrinsic link between the intensity of intellectual property protection and the optimization of regional technological innovation structure from the perspective of economic complexity theory. Using panel data and employing the dual fixed effects estimation method, we empirically examine the impact of intellectual property protection strength on innovation factors, the innovation environment, and innovation output. Our study finds that intellectual property protection has a positive incentive effect on knowledge acquisition, knowledge creation, the innovation environment, and substantive innovation, while it inhibits non-substantive innovation. Strong intellectual property protection effectively promotes the optimization of innovation factors, the innovation environment, and innovation output structures, thereby driving the optimization of the regional technological innovation structure. In terms of impact magnitude, the order from high to low is: knowledge creation, substantive innovation, innovation environment, knowledge acquisition, and non-substantive innovation. The “optimal intensity” of intellectual property protection significantly promotes the optimization of the regional technological innovation structure, whereas excessively strong or weak intellectual property protection hinders this optimization. Implementing a strategy of innovation-driven development requires further reform and improvement of the national intellectual property protection system to establish the optimal intensity of protection and promote the optimization of the regional technological innovation structure.