Instrumental Variable Techniques Research Articles

Comparative Effects of Maternal Educational Attainment and Instructional Scaffolding on a Child’s Educational Outcomes in Cameroon

This study investigates the comparative effects of married and single mothers’ educational attainment and instructional scaffolding on a child’s educational outcomes in Cameroon. The demographic survey data used is collected from the Cameroon National Institute of Statistics database. Employing the instrumental variable (IV) probit estimation technique, the study shows that an additional year of married mothers’ education as opposed to single mothers has positive and statistically significant effects on children’s educational outcomes. Using the analysis of variance estimation technique, the study reveals that married and single mothers’ utilization of instructional scaffolding has positive and statistically significant effects on children’s educational outcomes. Moreover, the findings indicate that Piaget and Vygotsky’s framework of instructional scaffolding is applicable in the Cameroonian economy. The study therefore recommends that the Cameroon government can improve early childhood education by creating a capacity building workshop where married and single parents will be educated on the value of attaining higher levels of education, how to adapt the culture of using one-on-one scaffolding technique as well as prompt questioning technique to scaffold a child. The study further recommends that married and single mothers should use innovative scaffolding techniques, provide appropriate explanations and give spaces for children’s voices and feedback throughout the instructional scaffolding process.

Determinants and consequences of large-scale tree plantation projects: Evidence from the Great Plains Shelterbelt Project

This paper examines the determinants and consequences of the adoption of large- scale tree plantation projects on farmland using the experience of the Great Plains Shelterbelt Project in the late 1930s. I show how agricultural market pressure influenced the decision to plant shelterbelt trees on the cropland and how soil erosion has changed in the long run because of the large-scale tree plantation. I compile a primary database on shelterbelt adoption from the archives and use a difference- in-difference model to study the determinants of the county-level adoption rate. The main finding is that an increase in the market crop price reduces the adoption of shelterbelt trees. Agricultural factors such as tenancy, access to irrigation, and duration of the agricultural contract explain the variations in the decision process. I use an instrumental variable technique to study the persistent effects of the plantation project in the long run. I show that shelterbelt adoption in the 1930s decreases wind erosion even in the 2000s and that the effect is concentrated in pasture areas.

Do emerging market corporates mimic the payout policy of peers?

PurposeThis study aims to investigate the effects of peers on corporate payout policies in one of the largest emerging markets – India. It also examines the motives for mimicking payout decisions.Design/methodology/approachThe sample is composed of 3,024 non-financial and non-government firms listed on the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) for the period 1995 to 2020. To encounter the endogeneity problem, the instrumental variable technique based on peer firms' idiosyncratic risk is used to estimate the effects of peers on firms' payout policy. To define peer reference groups, the authors use the basic industry classification of the firms.FindingsThe results indicate a significant positive impact of peers on firms' dividend policies in India. A firm with all dividend-paying peers is more likely to declare dividends than the one with no dividend-paying peers. Further, peer effects are found to be more pronounced amongst larger and older firms, thus supporting the rivalry theory of mimicking.Originality/valueTo the best of the authors' knowledge, the present study is the first of its kind that attempts to understand peer effects on payout decisions in an emerging market India, that offers a unique institutional setting. Moreover, the authors extend the existing literature by investigating the peer effects on a firm's payout policies considering various firm-level characteristics, such as growth opportunity, cash holding, financial constraint and profitability, which previous studies have not taken into consideration. These results provide additional insights into the heterogeneity and motives behind peer effects.

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 foreign direct investment promote political stability? Evidence from developing economies

Socio-political instability remains a threat to development. While concerns are often raised regarding the role foreign investors play in perpetuating this threat, empirical evidence on FDI’s internal political effects is scarce and presents mixed results. In line with the literature on the determinants of political risk, this paper posits that by generating economic opportunities, FDI promotes political stability. Unlike the extant literature, which considers overall FDI, I test this hypothesis by focusing on greenfield FDI, given its greater socio-economic externalities resulting from directly generated new economic activity and jobs. While this literature focuses on armed conflicts, socio-political stability in this paper is approached from an institutional perspective. Based on a large sample of developing countries and instrumental variable techniques, the results show that FDI fosters socio-political stability. Accounting for political repression, the results also highlight that FDI-induced stability is compatible with governmental respect for human rights, thus preserving individual well-being.

Sub-Saharan Africa’s Tragedy: Resource Curse, Democracy and Income Inequality

This study utilized instrumental variable techniques and the Driscoll-Kraay estimator to examine the effect of democracy and natural resources on income inequality using a comprehensive panel dataset from 43 sub-Saharan Africa (SSA). The findings from our empirical analysis indicated that natural resources and democracy indices such as electoral, liberal, participatory, deliberative, and egalitarian drive income inequality in SSA. Regional comparative analysis also showed that the democracy indices increase income inequality in West, Central, and Southern Africa while having a neutral effect on income inequality in Eastern Africa. Natural resources were revealed to reduce income inequality in West and Southern African countries while increasing income inequality in Eastern Africa. In the case of Central Africa, natural resources play an insignificant role in income inequality. The interactive effect analysis indicates that the democracy indices interact with natural resources to increase income inequality in SSA. Finally, the democracy indices interacted with natural resources to drive income inequality in Eastern and Southern African countries while exerting an insignificant effect on income inequality in West and Central African countries. The policy implications of the findings are discussed.

Do low-skilled migrant remittances help achieve SDG 10?

ABSTRACT In this paper we explore the role migrant skill composition plays in remittances and income inequality’ relationships, using a panel study of 53 African countries over the period 1990–2020 and referring to two strands of literature that demonstrate that (1) highly skilled migrants widen the income gap in the home country; and (2) they have fewer incentives to remit compared to their less-skilled compatriots. The instrumental variable technique was employed to estimate a dynamic panel data model whilst rectifying endogeneity issues. The findings reveal that a policy that shifts the migrant skill composition toward the less-skilled workers could channel more remittance funds to poor households, resulting in diminishing the income disparity in the home country. Migration policies attempting to mitigate the brain drain and facilitate the migration of low-skilled workers would enable the attenuation of the income inequality gap.

Attributable mortality benefit of digoxin treatment in hypoplastic left heart syndrome after the Norwood operation: An instrumental variable-based analysis using data from the Pediatric Health Information Systems Database

BackgroundObservational studies have demonstrated an association between the use of digoxin and reduced interstage mortality after Norwood operation for hypoplastic left heart syndrome (HLHS). Digoxin use has increased significantly but remains variable between different hospitals, independent of case-mix. Instrumental variable analyses have the potential to overcome unmeasured confounding, the major limitation of previous observational studies and to generate an estimate of the attributable benefit of treatment with digoxin. MethodsA cohort of neonates with HLHS born from January 1, 2007 to December 31, 2021 who underwent Norwood operation at Pediatric Health Information Systems Database hospitals and survived >14 days after operation were studied. Using hospital-specific, 6-month likelihood of administering digoxin as an instrumental variable, analyses adjusting for both unmeasured confounding (using the instrumental variable) and measured confounders with multivariable logistic regression were performed. ResultsThe study population included 5,148 subjects treated at 47 hospitals of which 63% were male and 46% non-Hispanic white. Of these, 44% (n = 2,184) were prescribed digoxin. Treatment with digoxin was associated with superior 1-year transplant-free survival in unadjusted analyses (85% vs 82%, P = .02). This survival benefit persisted in an instrumental-variable analysis (OR: 0.71, 95% CI: 0.54-0.94, P = .01), which can be converted to an absolute risk reduction of 5% (number needed to treat of 20). ConclusionsIn this observational study of patients with HLHS after Norwood using instrumental variable techniques, a significant benefit in 1-year transplant-free survival attributable to digoxin was demonstrated. In the absence of clinical trial data, this should encourage the use of digoxin in this vulnerable population.

Natural gas rents and institutions as co-growth drivers: evidence from Gas Exporting Countries Forum with a panel 2SLS approach

PurposeThis study aims to investigate the implications of natural gas rents and institutions as co-drivers of economic growth, focusing on the Gas Exporting Countries Forum (GECF) with panel data between 2001 and 2021.Design/methodology/approachThis research paper uses a specialised two stage estimator, the panel instrumental variable technique (panel IV), which takes care of the potential endogeneity issues in the model.FindingsThe findings show that natural gas rent significantly impacts the economic growth of the GECF. On average, natural gas rent increases the sample’s growth rate by about 2.634% percentage points in the short run. The result indicates that the qualities of institutions (political and economic) have a significant positive long-term effect on the economies of the GECF. In addition, the study’s energy price volatility positively correlates with the countries’ growth.Research limitations/implicationsThere might be a need to investigate the effects of natural gas rents and institutions as co-growth drivers in each country within the GECF. The likelihood exists that the impact of natural gas rents and institutions on economic growth at the country’s level may differ from the outcome of such an experiment on the group level. Because of space and time limitations, this study could not carry out the specific country’s investigation of natural gas rents and institutions as a co-growth driver. That limitation may constitute further study to advance this study to a new height.Practical implicationsWith good institutions, natural gas rent is likely to be an alternative growth driver for some economies that rely on fossil fuels like oil as a growth driver. By extension, the GECF has the potential to rival Organisation of Petroleum Exporting Countries (OPEC) in the global energy market, particularly in achieving Sustainable Development Goal number seven. In essence, evidence in this study suggests that natural gas rent has long-term positive effects on the growth of the GECF, conditioned on good institutions. Moreover, the drive of global energy consumption towards sustainable energy usage is an economic blessing for the GECF. By extension, the demand for natural gas would continue to rise, creating opportunities to improve natural gas rents. By implication, the GECF would continue to benefit from the pursuit of sustainability as the world shifts towards energy consumption with less CO2.Originality/valueFirstly, this study models the qualities of institutions for the GECF. Secondly, to the best of the author’s knowledge, this study is the first attempt to examine natural gas rents and the qualities of institutions as co-determinants of economic growth among the GECF (a potential cartel).

Sparse dimensionality reduction approaches in Mendelian randomisation with highly correlated exposures.

Multivariable Mendelian randomisation (MVMR) is an instrumental variable technique that generalises the MR framework for multiple exposures. Framed as a regression problem, it is subject to the pitfall of multicollinearity. The bias and efficiency of MVMR estimates thus depends heavily on the correlation of exposures. Dimensionality reduction techniques such as principal component analysis (PCA) provide transformations of all the included variables that are effectively uncorrelated. We propose the use of sparse PCA (sPCA) algorithms that create principal components of subsets of the exposures with the aim of providing more interpretable and reliable MR estimates. The approach consists of three steps. We first apply a sparse dimension reduction method and transform the variant-exposure summary statistics to principal components. We then choose a subset of the principal components based on data-driven cutoffs, and estimate their strength as instruments with an adjusted F-statistic. Finally, we perform MR with these transformed exposures. This pipeline is demonstrated in a simulation study of highly correlated exposures and an applied example using summary data from a genome-wide association study of 97 highly correlated lipid metabolites. As a positive control, we tested the causal associations of the transformed exposures on coronary heart disease (CHD). Compared to the conventional inverse-variance weighted MVMR method and a weak instrument robust MVMR method (MR GRAPPLE), sparse component analysis achieved a superior balance of sparsity and biologically insightful grouping of the lipid traits.

The case for independence: Does central bank independence curb the spread of the underground economy?

AbstractThis paper considers an alternate dimension of government institutions associated with the separation of powers between government and its central bank. A more independent central bank is consistent with greater institutional quality and constraints on government. We propose that central bank independence influences the prevalence of the shadow, or underground, economy. Using cross‐country panel data for over 100 nations over the period 1991 to 2012, the results from instrumental variables techniques show that central bank independence curbs underground economic activity. Furthermore, considering different dimensions of independence, we find that independence related to central bank CEO, policy formation, and central bank lending are effective at checking the shadow sector. Overall, these findings are robust to a different measure of the underground economy, correcting for the potential influence of outliers, controlling for the impact of additional factors, accounting for heterogeneity related to the level of development, and considering the heterogeneity related to the prevalence of the shadow sector. The main implication of the results is that nations seeking to reduce the prevalence of the underground economy would benefit from policies that promote central bank independence.

Social R&D: Does academic freedom contribute to improved societal outcomes?

The economics literature views R&D as an important conduit for growth because it generates new ideas that can be translated into technological innovations. Some of this R&D occurs in universities, making academic freedom an important part of this process. This literature ignores the potential role that academic research in the social sciences plays toward achieving non-commercial societal outcomes. We bridge this gap by proposing that academia generates social R&D. We posit that greater degrees of academic freedom allow for social R&D to flourish and be transformed into policies that improve societal conditions. We test our hypothesis by studying the relationship between academic freedom and inequality using panel data of 132 countries over the 1967–2018 period. We measure academic freedom using an index developed by the V-Dem Institute. Our econometric analysis suggests that an increase in the index is associated with a decrease in inequality. We employ instrumental variable and interactive fixed effects techniques to try to lend support to the causal relationship between academic freedom and inequality. We argue that this negative relationship can be explained by academia, predominantly the social sciences, exerting pressure on governments to enact policies that redistribute wealth. We find evidence in support of this mechanism using data from other sources.

Income distribution, financial liberalisations and banking stability: Theory and international evidence

AbstractMotivated by Rajan's study and existing economic reform theories (especially the lobby theory), we highlight income inequality as a driver of financial liberalisations. However, no evidence yet supports this idea. To verify this liberalisation‐induced‐by‐inequality hypothesis, the nexus of income inequality and financial liberalisations is formalised and empirically investigated in this paper. We utilise an ordered logit model with two‐way fixed effects and panel data from 91 countries to conduct the analyses. The baseline empirical results indicate that income inequality is a positive and significant determinant of financial liberalisations in aggregate and three component indicators. The results for three component indicators remain stable after a series of robustness checks, including mitigating the potential endogeneity via IV‐2SLS, Lewbel instrumental variable technique and difference within group, assessing the bias from the unobservable variables, considering the persistent and learning effects of liberalisations and the interaction effects, alternating the measures of income inequality, reducing business cycle, and using financial reforms rather financial liberalisation as independent variable. The results for aggregate liberalisations are slightly unstable in models with persistent and learning effects. Thus, liberalisation‐induced‐by‐inequality hypothesis is generally confirmed. In addition, the impacts of income inequality on financial liberalisations are widely heterogeneous across countries, the rate of change in income inequality and wealth inequality could also predict the occurrence of financial liberalisations, and the evidence that income inequality makes the poor easier access credits (i.e., Rajan's hypothesis) is found. Finally, the role is investigated of financial liberalisations in shaping banking stability, and we find that financial liberalisations can enhance growth and lower financial risks.

Can renewable energy technology innovation promote mineral resources’ green utilization efficiency? Novel insights from regional development inequality

Strengthening the mineral resource's green utilization efficiency is the key to achieving high-quality development and sustainable mining in China. Moreover, exploring the impact of renewable energy technology innovation (RETI) on mineral resources' green utilization efficiency is integral to boosting the mining industry's overall efficiency and facilitating the energy transition. However, the ability and way of different regions to develop and utilize RETI may depend on their geographical location. Using the dataset covering 30 provinces from 2001 to 2020, this study empirically reveals novel evidence of regional inequality of the impact of RETI on mineral resources' green utilization efficiency. Results show that RETI significantly affects mineral resources' green utilization efficiency. Study results still hold after replacing the explanatory variables, using the instrumental variables technique to solve the endogeneity problem, removing extreme values, and excluding the effects of extreme events. In addition, the impact of RETI on mineral resources' green utilization efficiency depends on the regional location in terms of both significance and marginal effects. RETI significantly promotes mineral resources' green utilization efficiency in the central and western regions, while the opposite is true for eastern regions. Finally, the impact of RETI on mineral resources' green utilization efficiency has various effects depending on the industrial structure and human capital level changes. These findings can provide partial enlightenment for accelerating RETI to facilitate mineral resources' green utilization efficiency.

Impact of Microcredit on Household Consumption and Assets In Nepal

This paper intends to assess the impact of microcredit on Household Consumption and Assets in Nepal. The multivariate techniques used to achieve the objectives of the study. The study uses Nepal Living Standard Survey 2011 data, which covers 5,988 households. Considering the endogeneity in the microcredit participation of household, the study uses instrumental variable technique (IV method) for assessing the impact of microcredit on Household Consumption and Assets. After the adjustment of the endogeneity, distance of bank, distance of cooperative from household and holding of land size of household as the instruments, eligible household reduced 475 household from 779 total households of intervention group and similarly 2,953 households from 5,209 total households of control group. CMP (conditional mixed process) estimator used to give flexibility in terms of combining continuous and binary variables together in the same model. Multivariate analysis indicates that it has positive and significant relationship on household consumption and on assets, (household consumption is on Food Consumption, Non-Food Consumption and Total Consumption. And similarly, household assets are, on ownership of livestock such as buffaloes, cows, sheep, etc, Ownership on transportation such as Cycle or Motor cycle, Ownership on appliances, such as Refrigerator, Television, CD player) on intervention group than the control group. The result and finding and review of the literatures in this paper provided a wide range of evidence that microcredit programs can increase incomes and uplift families out of poverty. Microcredit would be a viable and potentially sustainable tool to reduce poverty in Nepal.

Does domestic migration adversely affect food security? Evidence from Vietnam

With a population of more than 100 million as of December 2022, food security remains a persistent challenge in Vietnam despite achieving a miracle of economic growth and social transformation in recent decades. Vietnam has also experienced a significant migration from rural areas into urban cities such as Ho Chi Minh City, Binh Duong, Dong Nai and Ba Ria - Vung Tau. The effects of domestic migration on food security have largely been neglected in the existing literature, particularly in Vietnam. This study investigates the impacts of domestic migration on food security using data from the Vietnam Household Living Standard Surveys. Food security is proxied by three dimensions: food expenditure, calorie consumption, and food diversity. The difference-in-difference and instrumental variable estimation techniques are used in this study to address endogeneity and selection bias. The empirical results reveal that domestic migration in Vietnam increases food expenditure and calorie consumption. We also find significant effects of wage, land and family characteristics such as education level and the number of family members on food security when different food groups are considered. Regional income, household headship and the number of children in a family mediate the relationship between domestic migration and food security in Vietnam.

Can Income Inequality be Affected by the Interaction Between ICTs and Human Capital?: The Evidence from Developing Countries.

Income inequality in developing countries remains a major concern. It has been established that higher inequality makes a greater proportion of the population vulnerable to poverty. This paper aimed to analyse the effect of the interaction between ICTs and human capital on income inequality in developing countries. Covering 89 developing countries for the period 2000 to 2015 and based on panel fixed effects instrumental variables technique, this study finds that the interaction between ICTs and human capital reduces overall income inequality on the one hand, and on the other, leads to an increase in the income shares of the poorest, and in particular relative to the richest in developing countries. Furthermore, the interaction between ICTs and human capital reinforces the impact of ICTs on income inequality in developing countries. These results suggest that prioritizing the acquisition of human capital by the poorest, as well as promoting access to and use of ICTs for the benefit of the poorest would significantly contribute to reduce overall income inequality and increase income shares of the poorest in developing countries.

Economic freedom, post materialism and economic growth

Whereas there is substantial evidence that economic freedom generates positive growth effects, much less is known about how social values impact the institutional framework underlying economic freedom. We address this gap in the literature, using panel data for a heterogeneous group of countries for the period 1980–2010 to examine whether post materialism influences the growth effect of economic freedom. Using instrumental variable estimation techniques within a three stages least square framework, we find that Fraser's economic freedom index and several of its components generate positive direct growth effects. Post materialism generates a negative direct growth effect. We also identify a positive indirect effect from post materialism that runs via economic freedom and its underlying components onto economic growth. These findings indicate that post materialism influences the institutional framework underlying economic freedom and that economic freedom acts as a transmission channel of economic effects of social values.

Causal nexus between agricultural credit rationing and repayment performance: A two-stage Tobit regression

<abstract> <p>The probability that the beneficiary would default on future payments poses a great risk to extending agricultural credit. Also, previous research on farmers' repayment of agricultural credit emphasized that a high default rate is a growing concern, thereby becoming a tall order for financial institutions to lend to farmers. Similarly, past studies accentuate an increasing focus on socio-economic characteristics as factors that explain the repayment rate. The nexus between repayment rates and credit rationing has not been well analyzed. The effect of credit rationing on repayment rate was therefore investigated. The study, therefore, investigates the causal effects of credit rationing on loan repayment performance using a structured questionnaire to elicit information from selected 240 respondents via a three-stage method of sampling technique, and the instrumental variable Tobit technique to analyze the effect of credit rationing on repayment performance. The result showed that the majority (70.83%) of the respondents are males, the mean age was 51 years with an average education year of 12.65. The result of instrumental variable Tobit regression confirmed the endogeneity of rationing rate (Wald test of exogeneity = Wald Chi2 (1) = 67.26; Prob > chi2 = 0.000) at a 1% level of statistical significance. The result with a Log-likelihood function (265.62459) revealed that the ration rate, among others, with coefficients of 0.4335, was a crucial factor in ascertaining the rate of repayment at various significant levels of the arable crop farmers in the research area. The key finding is that credit rationing did have a significantly positive influence on agricultural credit repayment. The research concluded that the significance of credit rationing in influencing the likelihood of repayment rate, points to the vital significance of adequacy in rationing borrowers.</p> </abstract>

Does Doing Good Diminish Cost of Capital? Evidence From South-East Asia Markets

Purpose: The ultimate goal of this study is to reassess the impact of ESG on the cost of capital. Methodology: This work is quantitative type using secondary data collected by Thomson & Reuters and World Bank. There are 247 sample companies in the 2009 – 2021 period spread across five Southeast Asian countries. The research uses the fixed effect method at the industrial level and the instrumental variable regression technique, which is estimated using the generalized moment (GMM) method to accommodate endogeneity. Findings: The ESG, ENVI, and SOCI coefficients are negative and statistically significant at the 1% level, further confirming that ESG performance is negatively associated with the cost of capital. Environmental and social aspects determine the level of the cost of capital. Meanwhile, governance issues are not a determining factor that can reduce the cost of capital. Novelty: Numerous studies have revealed inconclusive outcomes regarding the effectiveness of ESG in decreasing the cost of capital, particularly in Asian nations owing to their subpar institutional quality. This research seeks to bridge this gap by examining this relationship in the Southeast Asian countries. Keywords: Environment, Social, Governance, Cost of Capital, South-East Asia