Country Heterogeneity Research Articles

‘Investing’ in care for old age? An examination of long-term care expenditure dynamics and its spillovers

We study the dynamic drivers of expenditure on long-term care (LTC) programmes, and more specifically, the effects of labour market participation of traditional unpaid caregivers (women aged 40 and older) on LTC spending, alongside the spillover effects of a rise in LTC expenditure on health care expenditures (HCE) and the economy (per capita GDP). Our estimates draw from a panel of more than a decade worth of expenditure data from a sample of OECD countries. We use a panel vector auto-regressive (panel-VAR) system that considers the dynamics between the dependent variables. We find that LTC expenditure increases with the rise of the labour market participation of the traditional unpaid caregiver (women over 40 years of age), and that such expenditures rise exerts large spillover effects on health spending and the economy. We find that a 1% increase in female labour participation gives rise to a 1.48% increase in LTC expenditure and a 0.88% reduction in HCE. The effect of LTC spending over HCE is mainly driven by a reduction in inpatient and medicine expenditures, exhibiting large country heterogeneity. Finally, we document significant spillover effects of LTC expenditures on per capita GDP.

Linking of a multi-country discrete choice experiment and an agent-based model to simulate the diffusion of smart thermostats

In this paper, we link findings from a demographically representative discrete choice experiment (DCE) in eight European countries on the adoption of smart thermostats with an agent-based model (ABM) in a methodologically consistent way. We employ the ABM to simulate the diffusion pattern of smart thermostats until 2030 and to examine the effects of subsidies and recommendations by specific agents. Our findings highlight the importance of allowing for within- and across country heterogeneity in preferences for these policies and for technology attributes such as heating cost savings. Further, social interactions reinforce country differences in technology stock in the starting year of the simulations. We find that subsidies moderately accelerate the diffusion of smart thermostats, but they are less effective in countries with a large stock of smart thermostats in the starting year, strong preferences for heating cost savings, and when smart thermostats lead to a strong reduction in heating costs. For some countries, targeting subsidies at particular socio-economic groups (in our case low-income households) slightly mitigates free-riding effects. Our policy simulations further imply that recommendations by energy providers or by energy experts accelerate the diffusion of smart thermostats compared to recommendations by peers.

The effect of institutional factors on financial deepening: evidence from 50 African countries

PurposeThis paper investigates the impact of institutional factors on financial deepening and its implications on bank credit in Africa.Design/methodology/approachThe paper employs different panel econometric models to examine the heterogeneity of 50 African countries from 2000 to 2019. The estimators include panel corrected standard errors, system generalized method of moments, quantile and threshold regressions.FindingsThe results show that rule of law, regulatory quality, government effectiveness, voice and accountability, control of corruption and political stability significantly influence financial deepening in Africa. However, government effectiveness has a higher effect on middle- and high-income countries, while other indicators have a high impact on low-income countries. All institutional indicators have stronger effects, almost double, at higher financial depth levels than for countries with lower levels. Government effectiveness and regulatory quality impact financial deepening more for countries with strong institutions than weak ones. Thus, the relationship between institutional qualities and credit provided by banks is non-monotonic.Practical implicationsThe findings suggest that strengthening appropriate institutional factors based on country heterogeneity may effectively stimulate debt financing in Africa, the primary source of financing for small and medium-sized enterprises and entrepreneurs.Originality/valueThe novelty of this paper is that previous studies did not sufficiently scrutinize the heterogeneity of the structure of African economies – i.e. differences in institution, credit and income levels.

Foreign direct investment, capital accumulation, and growth: The rise of the Emerging South

Using a unique dataset on bilateral FDI flows between 1990 and 2012, we analyze the heterogeneous growth effects of FDI originating from the North, the Emerging South, and the South in each country group. After controlling for the aggregation bias, sample selection bias, country heterogeneity, and endogeneity issues, and using various estimation techniques and robustness tests, we detect no long-run effects of FDI on the host country per capita GDP growth, independent of its direction. However, we find a significantly positive effect on long-run levels of GDP per capita in the sub-country groups of North–North, Emerging-North, and South-Emerging. The effects are stronger for countries with similar institutional development levels.

Rising income inequality and the relative decline in subjective social status of the working class

The declining ‘subjective social status’ of the low-educated working class has been advanced as a prominent explanation for right-wing populism. The working class has certainly been adversely affected by rising income inequality over the past decades, but we do not actually know if their perceived standing in the social hierarchy has declined correspondingly over time. This article examines trends in subjective social status in two ‘most likely cases’ – Germany and the US – between 1980 and 2018. We find that the subjective social status of the working class has not declined in absolute terms. However, there is evidence for relative status declines for the working class in Germany and substantial within-class heterogeneity in both countries. These findings imply that rising income inequality has a nuanced impact on status perceptions. When assessing the role of subjective social status for political outcomes, longitudinal perspectives that consider both absolute and relative changes seem promising. Supplemental data for this article can be accessed online at: https://doi.org/10.1080/01402382.2022.2038892 .

Does Overseas Investment Raise Corporate Environmental Protection? Evidence from Chinese A-List Companies.

This paper uses the relevant data of China’s listed companies from 2010 to 2018 to test the impact of overseas investment on corporate environmental protection and further examines whether the heterogeneity of the company and the heterogeneity of the host country changes this effect. The research results show that the environmental protection of overseas investment companies is significantly higher than that of other companies. The impact of overseas investment on corporate environmental protection is dynamic, and it only helps improve corporate environmental protection after three years of investment. This article is conducive to causally identifying the logical relationship between overseas investment and corporate environmental protection. The policy significance is that the government can rationally guide companies to invest abroad, and oversea investment will help enhance corporate environmental protection.

The capital buffer calibration for other systemically important institutions‐Is the country heterogeneity in the EU caused by regulatory capture?

AbstractIn this article, we discuss how the too‐big‐to‐fail dilemma for large financial institution is addressed in the regulatory framework and how (differently) regulators in the EU apply it. The European Banking Authority (EBA) has devised a buffer guideline for identifying other systemically important institutions (OSIIs) to address this issue. This guideline defines how to identify OSIIs by a scoring process but does not specify how to map these scores into additional capital buffers. In this study, we empirically show that the OSII buffer assignment is very heterogeneous in Europe. First, based on all EU banks that were classified as OSIIs, we show that the OSII score has less impact on the OSII buffer than the headquarter country dummy. Second, if all countries applied the German OSII buffer assignment, the additional capital requirements in the euro area would increase by 90 bn EUR. Third, we analyze whether our results could be explained by regulatory capture which is measured by supervisory quality, supervisory funding, importance/concentration of the banking system, and political orientation of the government. We find among others that supervisory quality and supervisory funding without banks' participation increase OSII buffers significantly.

Measuring comprehensive carbon prices of national climate policies

ABSTRACT We measure the comprehensive carbon price from 2008 to 2019 resulting from climate policies imposed by 25 high-polluting countries that represent 82 percent of global carbon dioxide (CO2) emissions in 2019. Comprehensive carbon prices build upon previous notions—including explicit, effective, and implicit carbon prices—by incorporating a broad range of policies that reduce carbon emissions. We consider seven types of major market-based policies commonly used to create marginal incentives to reduce emissions: carbon taxes, emissions trading systems, fossil fuel taxes, fossil fuel subsidies, renewable portfolio standards, feed-in tariffs, and low-carbon fuel standards. Comprehensive carbon prices represent the weighted average of marginal incentives imposed on polluters by country policy mixes. We measure country-level comprehensive carbon prices by summing across all seven policies the product of (1) the marginal incentive imposed by a policy (expressed in dollars per ton of CO2 emitted), and (2) a CO2-emissions-coverage weight for that policy (equal to the proportion of CO2 emissions regulated by the policy relative to that country’s total CO2 emissions). We measure the global comprehensive carbon price by summing across all 25 countries the product of (1) each country’s comprehensive carbon price, and (2) that country’s proportion of CO2 emissions relative to total CO2 emissions from our sample of 25 countries. The global comprehensive carbon price has risen upward from +8.68 USD in 2008 to +19.13 USD in 2019, with a dip to +6.94 USD per ton in 2012. These values are far too low to appropriately address climate change. The comprehensive carbon price varies widely between countries, ranging from −128.35 USD to +146.25 USD in 2019. This heterogeneity means that polluters face uneven marginal incentives to reduce CO2 emissions. Our focus is on measuring marginal incentives rather than policy outcomes, such as overall emissions abatement, which we identify as a promising area for future research. KEY POLICY INSIGHTS Comprehensive carbon prices represent a useful metric for summarizing and tracking global and country-level efforts to mitigate carbon emissions through public policy. Comprehensive carbon prices report a dollar per ton of carbon dioxide emissions imposed by a wide range of climate policies including carbon taxes, emissions trading systems, fossil fuel subsidies and taxes, renewable portfolio standards, feed-in tariffs, and low-carbon fuel standards. Country-level comprehensive carbon prices vary widely, from −128.35 to +146.25 USD in 2019, reflecting wide heterogeneity in the overall effort countries are putting into climate mitigation. The global comprehensive carbon price has approximately doubled over the last decade, reaching a value of +19.13 USD in 2019, and remains too low to seriously address climate change.

A technical efficiency analysis of intra-central bank settlement mechanism in Eurozone

ABSTRACT This work employs the stochastic frontier method to explore the efficiency of the TARGET2 (T2) balances mechanism across the Eurozone countries. An index is introduced to support the estimation strategy and derives meaningful results from better capturing the mechanism’s efficiency. The analysis spans the period 2005–2017 and documents the significant role or inefficiencies influencing the role of T2 from unemployment and labor costs. The absence of T2 would have endangered the viability of the Eurozone to promote trade. There is enormous country heterogeneity on efficiency and inefficiency of the error terms in our model, which indicate persistent structural issues and temporary issues; to ensure its uninterrupted operation, the enhancement of the export orientation of the manufacturing base of countries with the least efficiency (high unemployment and labor costs) is essential.

Global and Regional Trends and Projections of Infective Endocarditis-Associated Disease Burden and Attributable Risk Factors from 1990 to 2030

Objective To forecast the future burden and its attributable risk factors of infective endocarditis (IE). Method We analyzed the disease burden of IE and its risk factors from 1990 to 2019 using the Global Burden of Disease 2019 database and projected the disease burden from 2020 to 2030 using a Bayesian age-period-cohort model. Results By 2030, the incidence of IE will increase uncontrollably on a global scale, with developed countries having the largest number of cases and developing countries experiencing the fastest growth. The affected population will be predominantly males, but the gender gap will narrow. The elderly in high-income countries will bear the greatest burden, with a gradual shift to middle-income countries. The incidence of IE in countries with middle/high-middle social-demographic indicators (SDI) will surpass that of high SDI countries. In China, the incidence rate and the number of IE will reach 18.07 per 100,000 and 451,596 in 2030, respectively. IE-associated deaths and heart failure will continue to impose a significant burden on society, the burden on women will increase and surpass that on men, and the elderly in high-SDI countries will bear the heaviest burden. High systolic blood pressure has become the primary risk factor for IE-related death. Conclusions This study provides comprehensive analyses of the disease burden and risk factors of IE worldwide over the next decade. The IE-associated incidence will increase in the future and the death and heart failure burden will not be appropriately controlled. Gender, age, regional, and country heterogeneity should be taken seriously to facilitate in making effective strategies for lowering the IE disease burden.

Global trends and problems of digital transformation in the global aviation services market

In the article, based on an assessment of the evolution, dynamics and modern trends in the development of world aviation, it was substantiated that at the present stage, aviation is one of the most globalized industries, continuing its geographical expansion, withstanding world crises and demonstrating longterm growth and sustainability. The main trends in the modernization of the aviation industry are revealed and the mechanisms of the impact of digitalization on the consumption patterns in the modern world market of aviation services in the context of demographic and technological shifts are assessed. The possibilities of introducing new models of service delivery in the context of digitalization of world aviation have been identified. The main global trends have been formulated that will determine the development of the world aviation services market in the context of its digitalization in the future, in particular: the development of customer focus; accelerated implementation of advanced data analytics; increasing pressure on airlines in the context of increasing environmental sustainability; complication of distribution systems in the context of increased competition with international companies — technology giants; modification of international airline networks; growth of cross-border partnerships and strategic alliances in the industry. We have found that the most important area of modernization of the industry will be the challenges of the development of intermodal and multimodal air transport communications, as well as the optimization of air traffic management at the international level. Finally, the authors believe that regulatory differentiation and heterogeneity in different countries remains a key barrier to digital transformation in the global aviation services market, and besides, national legislation is not yet able to timely adapt to the rapid changes taking place in the market.

Efficacy of monetary policy in a currency union? Evidence from Southern Africa's Common Monetary Area

<abstract><p>The Common Monetary Area (CMA) agreement has effectively granted the South African government sole discretion over monetary policy and implementation in the region. The effectiveness of this arrangement has long been under discussion given the heterogeneity of member countries. This paper uses a structural vector autoregressive (SVAR) to examine the efficacy of the interest rate channel in the CMA. Specifically, our analysis uses data from 2000M1-2018M12 to examine how economic output, inflation, money supply, domestic credit, and lending rate spread for each member country respond to shocks in the South African repo rate. The main findings indicate that a positive shock to the South African repo rate has a statistically significant negative impact on economic output and a positive effect on inflation at the 10 percent level for all countries in the CMA. The results also show that money supply, domestic credit, and lending rate spread respond asymmetrically across members countries.</p></abstract>

Nonbank Financial Intermediation in Times of Crisis: Identifying Leadership in the G20 Countries

Non-banking financial intermediation, which means the conduct of credit operations by financial institutions that do not have a license for this and was previously interpreted as “shadow banking”, has become a long-term trend in the development of the global financial market. The purpose of the study is to determine the changes in non-banking financial intermediation during periods of crises and the inter-crisis period, as well as to identify the leading countries in the development of non-banking financial intermediation in a long-term retrospective. A hypothesis is formulated that during periods of crises, not only does the volume of non-banking financial intermediation decrease (on a global scale and within national markets), but its structure also changes. To test the hypothesis, a cross-country comparative analysis of the level of development of non-banking financial intermediation based on the corresponding index was carried out, as well as clustering using the FOREL method to identify changes in the structure of global non-banking financial intermediation. As data sources, data from the Financial Stability Board Monitoring Dataset on Non-Bank Financial Intermediation and OECD. Stat data were used. The results of the study confirmed the correctness of the formulated hypothesis. On their basis, the directions for the development of non-banking financial intermediaries in the current conditions of the approaching recession of the world economy are determined: (1) maintaining the index of non-banking financial intermediation in the current range of values; (2) preservation of the polycluster structure of non-banking financial intermediation, since the decrease in the number of clusters occurs during periods of relative stability of the world economy; (3) increased heterogeneity of countries in terms of the level of non-banking financial intermediation. It is shown that the crisis caused by the pandemic had a stronger negative impact on non-banking financial intermediation than the global financial crisis. The theoretical significance of the results obtained is to identify the structure of global non-banking financial intermediation, as well as to propose a criterion for countries' leadership in terms of its level. The practical significance lies in the possibility of using the results obtained in the development of measures to ensure the stability of financial markets both at the global and national levels.

Does domestic investment respond to inflation targeting? A synthetic control investigation

Some countries have adopted an Inflation Targeting (IT) regime to reduce inflation and inflation uncertainty: two factors the literature suggests firms put positive weight on when making outlay decisions that may affect aggregate domestic investment. This observation naturally leads to the question of whether domestic investment responds to IT. We apply the synthetic control method to developed and developing IT and non-IT countries to estimate the IT regime's causal effect on the domestic investment over time while addressing country heterogeneity. Adopting an IT regime had no short or long-run effect, at conventional levels of significance, on domestic investment in 21 out of 29 treated countries; this dominant pattern appears consistent with recent works on rational inattentive behaviour of firms. However, IT induced mainly long-run heterogeneous changes in domestic investment prices in 9 targeters, suggesting that supply constraints external to firms can also weaken the link between IT and domestic investment.

A macro-level analysis of language learning and migration

Abstract This article investigates the macro-level drivers of adult-age language learning with a focus on migration based on a new dataset on German language learning in 77 countries (including Germany) for 1992–2006. Fixed-effects regressions show that language learning abroad is strongly associated with immigration from countries of the European Union and the Schengen Area whose citizens enjoy free access to Germany, while language learning in Germany is strongly associated with immigration from countries with restricted access. The different degrees of uncertainty about access to Germany seem to be of importance for preparatory language learning. To shed light on country heterogeneities, we substitute the location fixed effects with a vector of country characteristics, which include several distance measures among others, and we estimate a random-effects model. Last, we provide some tentative arguments in favour of a causal interpretation. The main results related to the role of uncertainty are mostly unaffected. The Skilled Immigration Act from 2020 removes part of this uncertainty with potential positive effects on preparatory language learning and economic and social integration.

Division of International Special Education and Services (DISES) Information Brief February 2021

Division of International Special Education and Services (DISES) Information Brief February 2021

The Impact of Academic Freedom on Democracy in Africa

Shared experiences but diversified developments make Africa an interesting region in which to investigate the impact of education on democracy, and the role of academic freedom in this impact. As building expertise takes time, we focus on the causality between past experience of academic freedom and electoral democracy. Our theory is that independent experts advocating free and fair elections are acclaimed, which makes rigging elections a costly strategy for rulers. Using the Varieties of Democracy (V-Dem) index of Academic Freedom, and the Generalized method of moments (GMM) technique to estimate a dynamic panel model, we find a positive impact of preceding academic freedom on the quality of elections after the Post-Cold war democratic transitions. The result is robust when we check reverse causality and country-specific effects such as the initial level of democracy or dependence on oil exportation. The analysis is robust to indicators measuring democracy by accountability of the executive and Polity2 and Freedom House Indices as alternatives to V-Dem measures of democracy. We discuss the observed heterogeneity of countries showing a counterintuitive relationship. The study highlights the significance of scholars as a channel through which education supports democracy.

Fractional cointegration between gold price and inflation rate: Implication for inflation rate persistence

In this study, we employ a recently developed Fractional Cointegrating Vector Autoregressive (FCVAR) model to analyze the relationship between gold price and inflation rate, to determine the responsiveness of inflation rate persistence of the selected countries to gold price shocks. Our analyses cover two decades; ranging from January 2001 to December 2019. We also account for country heterogeneity; specifically, due to variation in countries’ level of development, income level, and monetary policy framework. Our results suggest that the effect of gold price shock lingers for a long time on inflation rate persistence of developing countries, and for a short time on inflation rate persistence of developed countries. We also find that a higher level of income is associated with lower gold price – inflation rate cointegrating persistence, but the possibility of high-income countries having higher gold price – inflation rate cointegrating persistence than low-income countries cannot be dispelled. We also find that adoption of inflation targeting monetary policy reduces gold price – inflation rate cointegrating persistence and that gold price – inflation rate cointegrating persistence is higher under limited or intermediate floating exchange rate arrangement than under free-floating and currency peg arrangement.

Co2 emissions and economic development in Africa: Evidence from a dynamic spatial panel model

The nexus between environmental degradation and economic growth continues to generate growing interest from environmental practitioners, industrialists, and researchers. Most existing studies in Africa have investigated the relationship based on the Environmental Kuznets Curve (EKC) theory under assumptions of homogeneity and spatial independence. In contrast, we investigate the EKC theory under more realistic possibilities of country heterogeneity and spatial dependence. Accordingly, we make two contributions. First, following estimation based on a sample of 48 African countries, we perform a quadratic regression for each country to account for heterogeneity. Second, we test and control for spatial dependence using the Global Moran's I test and the Maximum Likelihood Estimator (MLE) within the Fixed and Random effects on the Spatial-Durbin-Model, respectively. We also estimate the relationship using pooled OLS, Fixed and Random effects, and the generalised methods of moments (GMM). We document three key results: (1) the EKC hypothesis holds for the entire sample of 48 countries, even though the relationship is weak, (2) the relationship is sensitive to factor heterogeneity, with the EKC holding in some countries, while it breaks in others, and (3) there exist significant direct and spillover effects in the Co2-growth nexus across countries. Our findings provide a strong case for increased technological progress in pollution abatement, more abatement intensity, and adoption of cleaner production techniques. Specifically, we urge governments, multilateral organisations, and private investors to increase investments in renewable energy development projects. Given heterogeneity effects, we call for country specific measures which speaks to the Paris agreement.

The Impacts of Economic Policy Uncertainty on Trade Flow

ABSTRACT This paper examines the impacts of economic policy uncertainty (EPU) on the trade flow of 143 countries, considering the EPU of exporter and importer countries and the income heterogeneity of the sample countries for over 2000–2019. Besides, it considered the mediating role of regional trade agreements (RTAs) in the EPU-trade nexus. Our results of the two-step Heckman sample selection model imply that the intensive and extensive margins of trade are adversely affected by the exporter and importer countries’ EPU. However, the negative effects of EPU of exporter countries on trade performance turn to positive when the mediating role of the RTAs is controlled. Also, the counterfactual simulation analysis is conducted to compute illustrative distance equivalents of improving the EPU to the average performing country in the sample. Finally, the marginal effect of EPU with respect to GDP per capita results indicates that the higher levels of per capita income seem to decrease the negative effect of EPU on trade. Our findings are robust after we run sensitivity analysis using the Poisson pseudo-maximum likelihood (PPML) to control heterogeneity and zero-valued observations issues. Finally, based on the findings, policy implications are forwarded.