Hausman-Taylor Model Research Articles

Preventable mortality, related socioeconomic, and cultural factors across European countries

Preventable mortality is a societal burden, impacting significantly on a country’s economy. The aim of this study is to identify the factors associated with the preventable mortality rate across European countries. The major contribution of this study comes from the consideration of cultural values to be related with preventable mortality. The cultural values taken into consideration are uncertainty avoidance and long-term orientation which have a strong correlation with economic preferences. For this purpose, panel data from 27 countries was collected for the period 2011–2019. Various models were applied to the dataset, including least squares dummy variable regression, AR(1) model, as well as Driscoll-Kraay, Prais-Winstein, and Hausman-Taylor models. Results show that while preventable mortality rate across European countries closely correlates with GDP per capita, social security expenditures, and air pollution, it is also associated with immigrants per capita and health expenditures. The key findings point to the relationship between cultural values and preventable mortality. These results show that designing effective policies and measures to reduce preventable mortality need to account for the cultural traits of the population.

A Pretest Estimator for the Two-Way Error Component Model

For a panel data linear regression model with both individual and time effects, empirical studies select the two-way random-effects (TWRE) estimator if the Hausman test based on the contrast between the two-way fixed-effects (TWFE) estimator and the TWRE estimator is not rejected. Alternatively, they select the TWFE estimator in cases where this Hausman test rejects the null hypothesis. Not all the regressors may be correlated with these individual and time effects. The one-way Hausman-Taylor model has been generalized to the two-way error component model and allow some but not all regressors to be correlated with these individual and time effects. This paper proposes a pretest estimator for this two-way error component panel data regression model based on two Hausman tests. The first Hausman test is based upon the contrast between the TWFE and the TWRE estimators. The second Hausman test is based on the contrast between the two-way Hausman and Taylor (TWHT) estimator and the TWFE estimator. The Monte Carlo results show that this pretest estimator is always second best in MSE performance compared to the efficient estimator, whether the model is random-effects, fixed-effects or Hausman and Taylor. This paper generalizes the one-way pretest estimator to the two-way error component model.

The effectiveness of regulations preventing alcohol-related road traffic crashes and fatalities in the European Union countries

Introduction: This article addresses the impact of policy measures on the number of alcohol-related crashes and fatalities in European Union countries. In particular, it assesses (1) whether mild or severe penalty measures should be used to reduce the number of crashes and fatalities caused by alcohol; and (2) whether alcoholic beverages should be treated differently or proportionally to their alcohol content. Methods: This study analyzed the number of alcohol-related crashes and fatalities in 24 European Union countries between 2002 and 2014. The methodology involved fixed-effects panel models, models with instrumental variables, the Hausman–Taylor model, and seemingly unrelated regressions (SUR). SUR improve the results of coefficient estimates when the data are not complete. Results: The results of the SUR indicated that vehicle impoundment, community service, and alcolocks correlate with lower crashes, while detention correlates with lower fatalities. Furthermore, a higher alcohol content in beverages is positively associated with fatalities and negatively associated with the number of crashes. Conclusions: Mild and harsh measures for preventing alcohol-related crashes and fatalities differ in effectiveness; therefore, they should be used simultaneously. Blood alcohol concentration limits were found to be an ineffective tool for preventing crashes and fatalities under the influence of alcohol. Practical implications: The regulatory restrictions on different types of alcohol should be stricter for hard alcohol (especially spirits) and lower for low-alcohol beverages, such as beer, if fewer fatalities are preferred to fewer crashes.

Dynamic space–time panel data models: An eigendecomposition-based bias-corrected least squares procedure

Jin et al. (2020) proposed an efficient, distribution-free least squares estimation method that utilizes the eigendecomposition of a weight matrix in a dynamic space–time pooled panel data model. Their three-step approach is very powerful compared to the well-known instrumental variable techniques. Unfortunately, for short panels, their method can lead to biased estimates of the autoregressive time dependence parameter and the spatio-temporal diffusion parameter, even when using their bias-corrected estimator. We propose a bias correction method inspired from Bun and Carree (2005, 2006) of the Jin et al. (2020) procedure. We also extend their eigendecomposition-based least squares procedure to the random effects model, the fixed effects model, the Mundlak-type and Chamberlain-type correlated random effects models, the Hausman–Taylor model and the common correlated effects model. Extensive Monte Carlo experiments show the good finite sample properties of the proposed estimators. An application on the link between pollution and economic activities, using a dynamic space–time STIRPAT model with common correlated effects on a panel of 81 countries over 1991–2015, shows the relevance of this approach. It underlines the importance of human activities in the pollution growth while reforestation is one of the most important levers to reduce the CO2 emissions per capita.

Does Female Education Generate Economic Growth? An Empirical Analysis of Western Balkan Countries

Abstract This paper investigates the relationship between female education and economic growth in Western Balkan countries during the period 2000-2019. The motive behind choosing Western Balkan countries was because there is insufficient research that has been made in this field of study; hence, this research assists to expand the issue of this topic. By using GDP as dependent variable, the paper addresses the question whether female education generates or not economic growth. The techniques applied for this study are OLS, fixed and random effects, and Hausman-Taylor model IVs. The findings show a positive relationship between GDP per capita, female labor participation, school enrollment primary, and literacy rate. On the other hand, there exists a negative relationship with fertility rate, while the school enrollment tertiary is statistically insignificant. This paper brings evidence that female education generates more economic growth in Western Balkan countries. Therefore, the Government of the Western Balkans should take into consideration to invest more on education of the woman in those countries. These in turn will lead to higher economic growth.

Inference on time-invariant variables using panel data: A pretest estimator

For static panel data models that include endogenous time-invariant variables correlated with individual effects, exogenous averages over time of time-varying variables can be internal instruments. To pretest their exogeneity, we first estimate a random effects model that includes all averages over time of time-varying variables (Mundlak, 1978; Krishnakumar, 2006). Internal instruments are then selected if their parameter is statistically different from zero (Mundlak, 1978; Hausman and Taylor, 1981). Finally, we estimate a Hausman-Taylor (1981) model using these internal instruments. We then evaluate the biases of currently used alternative estimators in a Monte-Carlo simulation: repeated between, ordinary least squares, two-stage restricted between, Oaxaca-Geisler estimator, fixed effect vector decomposition, and random effects (restricted generalized least squares).

Impact of smoking on the income level of Chinese urban residents: a two-wave follow-up of the China Family Panel Study

ObjectivesThis study attempts to analyse the impact of smoking on the income level of Chinese urban residents to provide a reference for creating informed regulations on cigarette smoking.DesignA population-based cohort...

Location advantages of lodging properties: A comparison between hotels and Airbnb units in an urban environment

This study aims to investigate various types of location advantages that contribute to lodging property performance. Using monthly revenue data for individual urban hotels and Airbnb units in Houston, Texas from 2014 to 2016, we apply the Hausman-Taylor model to estimate the effects of location factors. Several factors are confirmed, including accessibility to points of interest, transport convenience, the surrounding environment, and market conditions. The overall effect of location advantage is more substantial for urban hotels than Airbnb units. Findings do not reveal a sizable competition effect between urban hotels and Airbnb units. Furthermore, we unveil factors associated with location advantages for different hotel classes and Airbnb types by estimating the model using different sub-samples.

Board independence and information asymmetry: family firms vs non-family firms

PurposeThe purpose of this paper is to investigate the effect of independent directors in reducing firms’ information asymmetry. Moreover, the authors enrich this investigation by differentiating the effectiveness of independent directors in an intriguing comparative setting of family vs non-family firms. Family firms are used to represent an interesting environment where controlling insiders (i.e. firms’ founding families) have dominant control over corporate decisions. This study addresses the question of whether controlling-insiders dominate independent directors.Design/methodology/approachThe authors manually collect firms’ founder information to identify family firm status in a sample of S&P 500 firms. Following a large literature in capital market research, the authors proxy information asymmetry by trading volume, bid-ask spread and price volatility. The authors employ multivariate regression with two-stage least square analysis, instrumental variable method, Heckman selection model and Hausman–Taylor model to address the issue of endogenous selection of board of director and family firm status.FindingsThe authors find a negative relation between the board independence and information asymmetry, suggesting independent directors are effective in reducing information asymmetry. Furthermore, the authors find this negative relation is stronger in family firms. These results are robust after controlling for the endogenous issues using various models.Research limitations/implicationsOur results suggest that independent directors in family-controlled firms are more successful in reducing information asymmetry than their counterparts in non-family firms. The authors provide direct evidence to support the existing theoretical arguments from Rediker and Seth (1995) and Anderson and Reeb (2004) that founding families and independent boards might be a powerful combination for aligning the interest of insider and diffused shareholders. The findings ease a prevalent concern that the role of independent directors might be compromised in an environment with controlling shareholders, and advocate regulations promoting board independence for various business practices.Originality/valueA number of studies concentrate on the practice of corporate disclosure of firm’s performance and governance and how corporate disclosure mitigates information asymmetry (Leuz and Verrecchia, 2000; Ali et al., 2007; Chen et al., 2008). To the best of our knowledge, this study is the first to examine the impact of independent directors in reducing information asymmetry. The research adds to understanding the incentives of board members and supports recent findings that different types of investors have heterogeneous incentives for corporate disclosure (Srinidhi et al., 2014).

Estimation of linear dynamic panel data models with time‐invariant regressors

SummaryWe present a sequential approach to estimating a dynamic Hausman–Taylor model. We first estimate the coefficients of the time‐varying regressors and subsequently regress the first‐stage residuals on the time‐invariant regressors. In comparison to estimating all coefficients simultaneously, this two‐stage procedure is more robust against model misspecification, allows for a flexible choice of the first‐stage estimator, and enables simple testing of the overidentifying restrictions. For correct inference, we derive analytical standard error adjustments. We evaluate the finite‐sample properties with Monte Carlo simulations and apply the approach to a dynamic gravity equation for US outward foreign direct investment.

Determinants of the performance of traditional Chinese medicine clinics in Taiwan

The study attempts to investigate the features and determinants of the performance of Taiwanese Traditional Chinese Medicine (TCM) Clinics with data for 4905 TCM clinics over the 1998 to 2012 period. The empirical results from the fixed effects model and the Hausman-Taylor Model with cluster-robust standard errors reveal several interesting findings. First, consumer characteristics such as the frequency of disabling injuries has positive impacts on the volume of medical services provided by TCM clinics. These results imply that people are likely to select TCM as the option for medical treatment when they face the occurrence of physical injury in Taiwan. In addition, the scale measurements for TCM clinics including the numbers of physicians, medical personnel and divisions have significantly positive effects on the performance of TCM clinics, while their survival length also has the same effect. Finally, the global budget system under the NHI plays a key role in suppressing the revenue of TCM clinics through the peer review mechanism.

Entry and exit of small self-employed businesses in Korea’s service industries

This study examines the effect of unemployment on the entry of small self-employed businesses (SSBs) in Korea’s service industries and assesses whether the excess entry of SSBs has resulted in their excess exit. Twelve service industries that are frequently regarded as being SSB intensive in Korea are chosen. The Hausman–Taylor model is applied to Korean regional panel data for the period 2006–2014. The empirical results indicate that the relationship between unemployment and SSB formation varies across the sample industries. In particular, the unemployment-push (pull) hypothesis is confirmed in three (six) industries. Additionally, the results show that an increase in the number of existing businesses in the previous year, partly as a result of increased entries, has increased the number of closed SSBs. On the basis of these results, this study assesses the Korean government’s SSB policies and suggests several policy recommendations.

Does financial development accelerate economic growth?

PurposeThis study aims to empirically explore whether there is causality and in which direction, i.e. whether financial development generates economic growth or whether financial development merely follows economic growth in transition European countries, including Russian Federation and Turkey, during 1998-2015.Design/methodology/approachThe study uses different techniques such as pooled OLS, fixed and random effects and the Hausman–Taylor model with instrumental variables.FindingsThe regression results show a positive relationship between financial development indicators and real GDP per capita growth, thus supporting the hypothesis that finance leads economic growth. The result also shows that financial crisis has a negative effect on real GDP per capita growth. Furthermore, these findings show that government spending and inflation have a negative impact on real GDP per capita growth. The study also shows that financial development plays growth-supporting role in real GDP per capita growth in 20 European countries in transition, including Russian Federation and Turkey.Practical implicationsAs financial development generates real GDP per capita growth, on the basis of the results of the study, a course of action that involves institutional improvement and incentivizing competition in the financial sector is recommended to the Central Banks’ policymakers in transition economies. These will in turn lead to higher real GDP per capita growth.Originality/valueThe study is original in nature and makes effort to promote financial development in transition European countries, including Russian Federation and Turkey. The findings of this study will be of value to Central Banks and other policymakers.

Some Like It (Less) Hot: Extracting Trade-Off Measures for Physically Coupled Amenities

AbstractThe urban heat island (UHI) provides direct evidence of human activities contributing to a feedback loop that changes ecosystem services by creating localized warming and differences in vegetated landscapes in areas around the urban core. This paper develops a new spatial-temporal panel estimator to recover consistent estimates of households’ valuation of coupled landscape and temperature ecosystem services. Using data from Phoenix, AZ, we estimate a hedonic price function using an extension of the Hausman-Taylor model to overcome challenges associated with the varying spatial scales of capitalization of landscape and temperature variables and omitted variables. We find a positive and economically significant marginal willingness to pay (MWTP) for measures of green landscaping at multiple spatial scales and a separate MWTP for a one degree (F) reduction in outdoor temperatures of $72 monthly.

Intra-ASEAN Trade Gravity Model and Spatial Hausman-Taylor Approach

This study examines determinants of intra-industry trade between Vietnam and Asean countries. By solving endogenous problem and applying Hausman-Taylor model for panel two-way dataset, we detect that export flows of Vietnam gravitate to neighbouring countries and those with similar GDP. More importantly, the research indicates the existence of spatial-lag interaction.

JTRF Volume 56 No. 3, Fall 2017Private Vehicle Ownership in Provincial China

Private vehicle ownership has rapidly grown with China’s economic development and increasing incomes. This paper analyzes China’s provincial demands for private vehicles during the post-opening period 2000 – 2012. Based on estimates from pooled, fi xed effects and Hausman-Taylor models, private vehicle ownership during this period grew at an average annual rate of over 20%, all else constant. The study focuses on the roles of economic, spatial, investment and regulatory factors in shaping private vehicle demands. The study fi nds that increases in GDP per capita and vehicle use cost reinforce and constrain, respectively, the strong trend toward increased ownership. And absent changes in population density, higher percentages of the population in urban areas increase the demand for private vehicles. But increasing population density provides stronger incentives for reducing vehicle demands. Municipal restrictions aimed at reducing the congestion and environmental effects of vehicle ownership and use are effective in reducing provincial demands. A separate analysis of provinces that are at least 60% urbanized identifi es important differences. Vehicle demands are income elastic and infrastructure investments have stronger effects in the most urbanized provinces than in less urbanized provinces.

An Empirical Analysis of the Determinants of Economic Growth in the Western Balkans

Abstract The objective of this paper is to assess the main determinants and the policies that affect economic growth in the Western Balkan over the period 1994 to 2015. It employs techniques such as pooled OLS, fixed and random effects model, and Hausman-Taylor model with instrumental variables (IV). The study shows evidence of conditional convergence, indicating the need for an upward move in the steady state level. The results show that foreign direct investments, gross savings and domestic credit to the private sector have a positive effect on per capita growth. On the other hand, initial level of per capita growth, corruption, unemployment, and general government final consumption, have a negative relationship with per capita growth. The study also shows a puzzling result, that schooling is not a significant factor for growth in Western Balkans. The study also highlights the relevance of attracting more foreign direct investments and reduction in corruption.

Time Zones Matter: The Impact of Distance and Time Zones on Services Trade

AbstractGiven the need for proximity in the provision of many services, factors such as geographical distance place a higher cost burden on the delivery of services in foreign markets as compared to goods trade. In addition, differences in time zones add significantly to the costs of service transactions. Decomposing the impact of distance into a longitudinal and latitudinal component and accounting for differences in time zones, it is possible to identify in detail the factors driving the impact of increasing coordination costs on the delivery of services through foreign affiliates. Working with a bilateral US data set on foreign affiliate sales in services this paper examines the impact of time zone differences and east–west and north–south distance on US outward affiliate sales, by employing a Hausman–Taylor model for services trade by foreign affiliates. Both distance components as well as time zone differences have a significant positive effect on foreign affiliate sales. By decomposing the effect of distance the results show that increasing east–west or north–south distance by 100 km raises affiliates sales by 2 per cent. Regarding time zone differences, the findings suggest that affiliate sales increase as hourly time zone differences get larger.

Estimation of Linear Dynamic Panel Data Models with Time-Invariant Regressors

We propose a two-stage estimation procedure to identify the effects of time-invariant regressors in a dynamic version of the Hausman-Taylor model. We first estimate the coefficients of the time-varying regressors and subsequently regress the first-stage residuals on the time-invariant regressors providing analytical standard error adjustments for the second-stage coefficients. The two-stage approach is more robust against misspecification than GMM estimators that obtain all parameter estimates simultaneously. In addition, it allows exploiting advantages of estimators relying on transformations to eliminate the unit-specific heterogeneity. We analytically demonstrate under which conditions the one-stage and two-stage GMM estimators are equivalent. Monte Carlo results highlight the advantages of the two-stage approach infinite samples. Finally, the approach is illustrated with the estimation of a dynamic gravity equation for U.S. outward foreign direct investment. JEL Classification: C13, C23, F23

Did relational capital matter during the financial crisis?

This paper aims to contribute to the body of empirical studies that address the importance of investments in companies’ relationships and the way in which they influence value creation in the global economic crisis. We employ linear panel analysis using the Hausman-Taylor model to analyse panel data for companies from the five largest European countries in the period 2004–2011. Different types of exogenous and endogenous links which a company could have in different stages of the crisis are investigated. The findings suggest that there is a statistically significant and positive link between relational capital and a firm’s value. Moreover, we identify several differences in the significance of the inputs during different crisis periods. The study provides both theoretical and practical insights into investments in intangibles for framing strategy decisions with a particular focus on the role of relational capital. This could provide scholars and practitioners with a working basis for understanding connections and the implications of strategising in the context of a company’s networks.