Instrumental Variable Method Research Articles

Revisiting the resource curse hypothesis from the viewpoint of green growth: The role of Fintech as the de-cursing agent

Conventionally, the resource curse hypothesis highlights the economic growth-inhibiting impacts that are often associated with the expansion of natural resource-based industries. However, not much focus has been given to assessing whether natural resource consumption hinders green growth establishment, as well. Hence, this study makes a novel attempt at evaluating the validity of the resource curse hypothesis from the viewpoint of green growth in the context of selected Sub-Saharan African countries. Notably, this study focuses on whether natural resource abundance upholds green growth in the concerned Sub-Saharan African nations, especially by reducing their annual carbon emission-adjusted economic growth levels. More importantly, this study ascertains whether Fintech development, via the channel of Fintech-based startup financing, can promote green growth in these countries and thereby act as a de-cursing agent for tackling the possible economic and environmental curses imposed by their natural resource sectors. Accordingly, by employing a recently developed two-stage instrumental variable regression method, the resource curse hypothesis is verified from the perspective of green growth establishment. On the other hand, Fintech development is found to not only promote green growth on its own but also act as a de-cursing agent that partially offsets the green growth-impeding effects associated with natural resource consumption. Furthermore, capital accumulation is identified as a green growth-restricting factor while institutional quality improvement is observed to stimulate green growth across the selected Sub-Saharan African countries. Therefore, considering these major findings, a couple of green growth-promoting policy suggestions are put forward.

The impact of infectious disease experience on household consumption: evidence from rural China.

The issue of low consumption among rural households in China has a longstanding history, and the experience of infectious diseases may exacerbate the existing challenges in fostering consumption growth. However, studies that characterize the impact of infectious diseases on household consumption are limited in China. This study aims to explore rural household consumption responses to infectious diseases post-assessment, and identify the underlying mechanisms. A total of 1,539 rural households from China Family Panel Studies (CFPS) datasets of 2014, 2016, 2018, and 2020 were recruited as the study sample. The presence of infectious disease experience was employed as the independent variable and household consumption as the dependent variable. A panel fixed effects (FE) regression model was initially employed to identify the influence of infectious disease experiences on rural household consumption. The instrumental variable (IV) method was used to address potential endogeneity between independent and dependent variables. Robustness checks such as Propensity Score Matching (PSM) test were employed to ensure the reliability of the findings. The results reveal a statistically significant negative impact of infectious disease experiences on consumption over time, becoming no more significant at around 7-9 years post-disaster. This effect leads to more pronounced consumption deprivation for households with limited health insurance coverage and heightened healthcare resource constraints. The mechanism test indicates that infectious disease experiences affect the consumption levels of rural households through channels that include income constraints, the crowding-out of healthcare expenditure, and risk perception, with the precautionary savings motive acting as a moderator. Furthermore, the diminishing effect of infectious diseases on individual consumption surpasses that of natural disasters. Temporal discrepancy is observed in the impacts of infectious and chronic disease shocks on household consumption. The accumulation of liquid assets emerges as an effective strategy for households to mitigate the impact of infectious disease shocks. The findings underscore the importance of integrating short- and long-term policies to bolster consumption capacity, strategically allocate inter-regional medical resources, and fortify the resilience of rural households against economic risks.

Does fiscal decentralization reduce environmental degradation through mitigating resource mismatch and digital transformation? Evidence from China's resource-based cities

Fiscal federalism grants local governments a certain degree of fiscal autonomy and stimulates their motivation. This study analyses the impact of fiscal decentralization on urban carbon emission reduction using the double fixed-effects model and the mediated-effects model using data from 187 resource-based cities in China from 2011 to 2020. It is found that fiscal decentralization significantly promotes energy saving and emission reduction, which is reflected in the significant negative correlation between fiscal decentralization and the size of urban carbon emissions and the positive correlation with carbon emission efficiency. These results are still robust after replacing the carbon emission scale and carbon emission efficiency and using the instrumental variable method. Heterogeneity analysis reveals that fiscal decentralization significantly suppresses the carbon emission scale and positively contributes to carbon emission efficiency in the country's east-central part and resource-based cities with lower marketization. Mechanistic analyses suggest that mitigating land resource mismatch and enhancing the degree of government digital transformation are critical factors for fiscal decentralization to reduce carbon emissions. This study provides empirical support for how policymakers can balance the relationship between economic development and environmental protection when formulating local fiscal policies.

Dissecting the impact of the three E, S, G pillars on credit risk

This study explores the impact of Environmental, Social, and Governance (ESG) scores on the credit risk of Chinese A-share listed companies. Based on the empirical study, we analyse both the individual and combined effects of E, S, and G scores. Our findings indicate that improvements in ESG scores significantly reduce credit risk, particularly among green companies and those with high transparency. This conclusion remains robust after accounting for potential endogeneity bias through the application of the instrumental variable method. Furthermore, our study delves into how ESG scores impact credit risk. An increase in ESG scores reduces a company’s debt default risk by decreasing the negative ESG-related news sentiment, enhancing stock liquidity, lowering financing costs, and improving the quality of internal controls. These insights contribute to a deeper understanding of ESG factors in risk management and offer practical guidance for companies seeking to enhance their ESG performance in relation to credit risk.

Directors' and Officers' Liability Insurance and the Digital Transformation of Enterprises: Based on the Empirical Evidence of Listed Companies in China from 2011 to 2021

Amidst the wave of the digital economy, numerous enterprises have commenced the process of digital transformation to address market challenges and fluctuations, as well as to pursue sustainable growth. Directors' and officers' liability insurance (D&O insurance), being an essential instrument of corporate governance, necessitates an empirical investigation to unravel its influence on enterprises' digital transformation. This study selects Shanghai-Shenzhen A-share listed companies from 2011 to 2021 as research subjects to examine the impact of D&O insurance procurement on enterprises' digital transformation and its underlying mechanisms. The findings reveal that the procurement of D&O insurance significantly fosters the progress of enterprise digital transformation, and this conclusion remains robust after employing a series of robustness tests, including the instrumental variable method and DIGT. The mechanism analysis indicates that by elevating the risk-bearing capacity of enterprise managers, the management efficiency of enterprises can be enhanced, thereby motivating supervisory executives to augment the quality of internal control and facilitate the digital transformation of enterprises. Further examination discloses that executive equity incentives and executive responsibility insurance possess complementary effects in promoting enterprise digital transformation, making the subscription of executive responsibility insurance a pivotal factor in enhancing the effectiveness of enterprise digital transformation and fostering high-quality economic development.

Revealing the impact of individual income inequality on different types of charitable giving in China through social interactions

AbstractObjectiveThis study delves into the correlation between individual income inequality as measured by the relative deprivation index and charitable giving, while also examining urban–rural heterogeneity. Additionally, it further explores the mechanisms by which online and offline forms of social interaction operate in this context.MethodsUtilizing data from the 2014–2020 China Family Panel Studies, we employed several methodologies including Probit regression models, cross‐model average marginal effects difference testing based on bootstrap method, instrumental variable method, and the Karlson–Holm–Breen (KHB) effect decomposition method.ResultsThe findings reveal that individual income inequality measured by the relative deprivation index significantly reduces charitable giving among Chinese households. The inhibitory effect of individual income inequality on social charitable giving is higher than that on charitable giving directed toward friends or colleagues. Furthermore, this impact exhibits some heterogeneity between urban and rural areas. Mechanism analysis indicates that the adverse effect of income inequality on charitable giving operates through reducing social interaction, including both online and offline forms.ConclusionOur results demonstrate that income inequality has distinct adverse effects on two types of charitable giving and explain the mechanisms underlying these effects through social interaction. A pattern of the differential mode of association similar to “ripples” in Chinese society is beneficial for understanding these differentiated impacts. We believe it is necessary to improve economic inequality conditions and enhance the enthusiasm of the Chinese public for participating in charitable donations by promoting various forms of social interaction.

Impact of online communication on the ambidextrous innovation investment of enterprises

With the rapid progress of China's information technology and digital economy, investors, especially retail investors, can communicate directly with enterprises on online platforms of stock exchanges. In this paper, using crawler means to collect all the question-and-answer (Q&A) logs on online platforms and taking A-share listed firms in 2010∼2020 as samples, we explore the effect of online communication between investors and enterprises on corporate ambidextrous innovation investment. The results show that such online interaction can greatly encourage developmental and exploratory innovation investment and play a more significant effect in the latter; the quality of communication is positively related to ambidextrous innovation investment, but excessive attention to investor returns in the interaction process restrains ambidextrous innovation investment. We take various approaches, such as the entropy balancing test, the instrumental variable method, and the Heckman two-stage method, to confirm the validity of the results. The mechanism test shows that interaction can increase ambidextrous innovation investment mainly by alleviating corporate financing constraints and improving corporate governance. Furthermore, we find that this effect is more evident in state-owned firms than in non-state-owned firms and that the promotion effect of interaction on ambidextrous innovation investment eventually helps improve firm value.

Likelihood-based instrumental variable methods for Cox proportional hazards model

Likelihood-based instrumental variable methods for Cox proportional hazards model

Safety and effectiveness of SGLT2 inhibitors in a UK population with type 2 diabetes and aged over 70 years: an instrumental variable approach.

Older adults are under-represented in trials, meaning the benefits and risks of glucose-lowering agents in this age group are unclear. The aim of this study was to assess the safety and effectiveness of sodium-glucose cotransporter 2 inhibitors (SGLT2i) in people with type 2 diabetes aged over 70 years using causal analysis. Hospital-linked UK primary care data (Clinical Practice Research Datalink, 2013-2020) were used to compare adverse events and effectiveness in individuals initiating SGLT2i compared with dipeptidyl peptidase-4 inhibitors (DPP4i). Analysis was age-stratified: <70 years (SGLT2i n=66,810, DPP4i n=76,172), ≥70 years (SGLT2i n=10,419, DPP4i n=33,434). Outcomes were assessed using the instrumental variable causal inference method and prescriber preference as the instrument. Risk of diabetic ketoacidosis was increased with SGLT2i in those aged ≥70 (incidence rate ratio compared with DPP4i: 3.82 [95% CI 1.12, 13.03]), but not in those aged <70 (1.12 [0.41, 3.04]). However, incidence rates with SGLT2i in those ≥70 was low (29.6 [29.5, 29.7]) per 10,000 person-years. SGLT2i were associated with similarly increased risk of genital infection in both age groups (incidence rate ratio in those <70: 2.27 [2.03, 2.53]; ≥70: 2.16 [1.77, 2.63]). There was no evidence of an increased risk of volume depletion, poor micturition control, urinary frequency, falls or amputation with SGLT2i in either age group. In those ≥70, HbA1c reduction was similar between SGLT2i and DPP4i (-0.3 mmol/mol [-1.6, 1.1], -0.02% [0.1, 0.1]), but in those <70, SGLT2i were more effective (-4 mmol/mol [4.8, -3.1], -0.4% [-0.4, -0.3]). Causal analysis suggests SGLT2i are effective in adults aged ≥70 years, but increase risk for genital infections and diabetic ketoacidosis. Our study extends RCT evidence to older adults with type 2 diabetes.

Do the types of agricultural socialized services and their diverse suppliers matter to farmland renting in rural China?

Based on the nationally representative panel data collected in 2000 households in 100 villages of 5 provinces in 2016 and 2019, this study analyzed the impact and potential paths of different types of agricultural socialization services (labor-intensive, technology-intensive, marketing) on farmland rented-in from the perspectives of accessibility and diversity of suppliers. The consistent results yielded from OLS, fixed effect model, and instrumental variable method showed that labor-intensive services had positive and significant effects on the probability and size of renting in farmland and it was much larger for the households without off-farm employment or with rich farmland endowment. However, neither technology-intensive nor marketing services had such effects . The substitution effect of different type of services on labor force, the attributes of service providers, and the characteristics of service buyers contributed to the difference. These findings imply that the government should pay more attention to the development of technology-intensive and marketing services, especially for smallholders, while keeping to encourage and support various suppliers to provide labor-intensive services.

Institutional quality and US FDI outflows: Do political regimes matter?

To what extent are the locational decisions for US FDI outflows affected by the nature of the political regimes along with the quality of institutions in the host countries? Using property rights protection as an indicator of institutional quality, this study analyses how sensitive US FDI outflows are to institutional factors and to the nature of the hosting countries’ political regimes. In other words, whether a democratic or an autocratic regime makes any difference in terms of attracting US FDI. A joint effect between democracy and the protection of property rights on US FDI flows is examined using a panel data fixed effect technique for forty-one countries during the period 1984–2021. The instrumental variable method is used to check the endogeneity concerns. The results predict that the protection of property rights can have a positive impact in attracting US FDI, provided the countries in question become more democratic in nature. The findings suggest that partial reform to enhance the institutional quality or unconsolidated democratization are insufficient to attract US FDI rather than complementing each other in bringing FDI. The implication of the findings reveals that a democratic country such as India can be a good location for US investment if its protection of property rights becomes stronger. Moreover, some highly democratic countries with strong institutions should be more market oriented and improve their quality of infrastructure to receive the maximum benefit. Our results are robust to alternate measures of institutional quality/democracy and endogeneity concerns.

Has climate change promoted the high-quality development of financial enterprises? Evidence from China

Climate change has become a critical global issue and challenge, with significant implications for financial enterprises as an integral part of economic activities. A thorough analysis of the impact of climate change on the high-quality development of financial enterprises is of great importance for financial sustainability. This paper first conducts an in-depth mathematical analysis of the intrinsic mechanisms through which climate change affects the high-quality development of financial enterprises by establishing a game theory model. Secondly, using data from listed companies for the years 2000–2020, an econometric model is constructed to empirically examine the relationship between climate change and the high-quality development of financial enterprises. The research findings demonstrate that climate change significantly inhibits the high-quality development of financial enterprises, as evidenced by robust results obtained through various methods such as data truncation, variable substitution, and changes in sample periods. Furthermore, this study addresses the endogeneity of the regression model using propensity score matching (PSM), instrumental variable methods, and system generalized method of moments (GMM). Additionally, climate change impacts the high-quality development of financial enterprises through technological innovation. Given the backdrop of climate change, understanding the relationship and logic between climate change and the high-quality development of financial enterprises and discerning the channels and mechanisms through which climate change affects their development are crucial. This research provides a new perspective and expands the research frontier on the high-quality development of financial enterprises, enriching the theoretical foundations in this field.

Assessing the peer effects of college students' engagement in the circular economy: Survey evidence from textbook reuse and recycling in China

In the face of escalating environmental impacts caused by human activities, the development of a circular economy is widely regarded as a crucial sustainable solution. Identifying pivotal enablers driving the transition gains increasing significance. Scarce research has focused on how to improve public engagement in the circular economy and acceptance of circular products, especially for developing countries. Based on an interview of 2912 Chinese college students conducted in 2021, and the instrumental variable method, this paper innovatively documents positive associations of circular practices among peers. Specifically, it is found that: (1) individuals exhibit positive responses when their fellow classmates actively adopt used textbooks; (2) the impact is more pronounced among students majoring in energy and environmental fields, and for cohorts with higher participation in voluntary activities advocating sustainable lifestyles; and (3) the spillover effect is also manifested in engagement in second-hand book recycling. Given the potential of peers' beneficial influence as a promising instrument for driving circular economy practices, it is recommended that public policies consider its catalytic role.

Valid instrumental variable selection method using negative control outcomes and constructing efficient estimator.

In observational studies, instrumental variable (IV) methods are commonly applied when there are unmeasured covariates. In Mendelian randomization, constructing an allele score using many single nucleotide polymorphisms is often implemented; however, estimating biased causal effects by including some invalid IVs poses some risks. Invalid IVs are those IV candidates that are associated with unobserved variables. To solve this problem, we developed a novel strategy using negative control outcomes (NCOs) as auxiliary variables. Using NCOs, we are able to select only valid IVs and exclude invalid IVs without knowing which of the instruments are invalid. We also developed a new two-step estimation procedure and proved the semiparametric efficiency of our estimator. The performance of our proposed method was superior to some previous methods through simulations. Subsequently, we applied the proposed method to the UK Biobank dataset. Our results demonstrate that the use of an auxiliary variable, such as an NCO, enables the selection of valid IVs with assumptions different from those used in previousmethods.

FEMALE IN MANAGER-OWNER TEAMS: DRIVERS OF INNOVATION AND FIRM PERFORMANCE IN MENA MARKETS

This study examines the relationship between women in pivotal organisational roles, innovation, and firm performance in the MENA region. It employs data from the World Bank Enterprise Survey (WBES) across six MENA countries to explore how female leadership, combined with managerial experience (ME), impacts innovation and firm performance. We employ the two-stage least square instrumental variable (2SLS-IV) regression method, which addresses potential biases caused by endogeneity and allows us to discern genuine causal relationships better. Our results indicate a positive influence of female leadership on innovation, although this effect diminishes with more excellent ME. Innovation remains a critical factor for firm performance in the MENA region. This research illuminates the multifaceted role of women in organisational leadership, underscoring their impact on innovation and firm performance, with implications for policymakers and business leaders globally.

Climate change, corporate risk-taking, and financialization: evidence from Chinese A-share non-financial listed companies

AbstractClimate change-induced risks, such as global warming, can affect the economic development of entities and, consequently, the stability of financial markets. Businesses are progressively making the transition to green in order to lessen the negative consequences of climate threats. This study examines the relationship between corporate risk-taking (CRISK) and financialization (FIN) in light of climate change. The impact of business risk-taking on financialization is experimentally investigated through the transmission chain of “CRISK - enterprise value – FIN” using a fixed-effects model. The study also analyzes the moderating effect of climate change on the direct and indirect channels of climate change by using “temperature” and “investors’ concern about climate,” respectively. In addition, the empirical results are tested for robustness using propensity score matching and an instrumental variable method. This study’s findings reveal the following key insights. First, CRISK significantly enhances FIN by improving firm value. Second, enterprises with high financing constraints and manufacturing enterprises are more likely to have a positive correlation between CRISK and FIN. Third, the relationship between CRISK and FIN is enhanced by the direct transmission channel of increasing climate risk, but the indirect transmission channel is not significant. This study proposes policy recommendations to address the effect of climate risk on CRISK and FIN. Among these suggestions are the prudent distribution of financial resources among enterprises according to their level of risk-taking and the reinforcement of regulatory authorities’ financial oversight of businesses with high financing constraints and the manufacturing sector. By implementing these policies, companies can better manage climate-related risks and contribute to financial stability.

Socioeconomic inequalities in access to online learning and its association with early childhood development during the COVID-19 pandemic in Yunnan Province, China

While online learning was widely adopted by schools during the COVID-19 pandemic globally, little is known about its effects on preschool children’s development in China. Using a unique dataset collected in Yunnan Province, China in 2020, with a sample of 11,990 children aged 3–5 years from 285 kindergartens, we provide the first comprehensive assessment of socioeconomic inequalities in access to online learning and its association with early childhood development (ECD). The study demonstrates significant inequalities in access to online learning. Particularly, preschoolers with rural household residential registration (Hukou), lower maternal schooling, and lower family income are less likely to have access to online learning than their counterparts. Regression results based on the Generalized Linear Model (GLM) and the Instrumental Variable (IV) method show that access to online learning is positively associated with a child’s ECD score. The empirical evidence of the unequal access to online learning and its possible consequence in ECD during the pandemic has policy implications that the ever-widening developmental gap for those lacking access to online learning needs to be addressed accordingly when the pandemic is over.

The greenhouse gas reduction effect of critical peak pricing for industrial electricity: Evidence from 285 Chinese cities, 2003–2019

This paper assesses the impact of the Pilot of Critical Peak Pricing for Industrial Electricity (PCPPIE) on industrial Greenhouse Gas (GHG) emissions by employing the Difference-in-Differences (DID) methodology. It is found that the cities participating in PCPPIE underwent a significant 11.3% reduction in the GHGs emitted per industrial enterprise. These findings remain robust across various methodologies, including staggered DID estimators, propensity score matching, instrumental variable methods, and spatial econometric regression. The generalized DID analysis shows that a higher critical peak price corresponds to a more substantial decrease in GHG emissions. PCPPIE achieves weaker GHG reduction in higher-administrative level cities but stronger in those with higher industrial share, and the effectiveness of PCPPIE is compromised by cross-regional electricity imports. PCPPIE reduces GHG emission intensity of the power industry and contributes to additional reductions in GHG emissions from other sources by fostering green technological innovation and facilitating energy substitution. The practical significance of this paper is to reveal a richer dynamic mechanism for China's green and sustainable development, indicating that critical peak pricing is a power pricing strategy worthy of strengthening and optimization in the process of China's carbon peak and carbon neutrality.

Economic effects of a controlled mangrove-to-pond coverage ratio policy on mangrove conservation and shrimp farming: A case study in vietnam using instrumental regression analysis

The mangrove-shrimp farming model in Vietnam's Mekong Delta region was devised to foster mangrove conservation while supporting the livelihoods of small-scale shrimp farmers by allocating them land for both mangrove protection and shrimp farming. However, this model faces challenges as farmers often clear mangrove areas to expand shrimp ponds, seeking greater profits. Based on data collected from structured interviews with shrimp farming households, an Instrumental Variable (IV) regression method is used in this study to examine the economic viability of mangrove-shrimp farming in the Tam Giang Protection Forest of Ca Mau province and predict the impacts of recommended fixed mangrove-to-pond coverage ratios (MPR) on shrimp yield and household income in two different scenarios. Findings reveal that almost half of the surveyed farmers do not meet the recommended MPR, prioritizing pond expansion over mangrove protection, suggesting prevalent noncompliance and ineffective regulatory enforcement. Additionally, the research highlighted the critical role of mangrove-shrimp farming in the livelihoods of these communities, with findings indicating that even minimal increases in pond area can enhance productivity. Conversely, stricter pond coverage regulations could potentially worsen the economic situation for numerous households.

Does internal control improve enterprise environmental, social, and governance information disclosure? Evidence from China

AbstractEnvironmental, social, and governance (ESG) is a relatively new concept that emphasizes how to contribute to creating sustainable businesses. However, research on factors that influence ESG development is insufficient. This study explores how internal control influence enterprise ESG information disclosure, using 2009–2021 data from China's A‐share listed companies. The findings show a substantial positive correlation between internal control quality and corporate ESG information disclosure. Particularly, the internal control quality significantly affects corporate governance information disclosure. Moreover, the connection between internal control quality and enterprise ESG information disclosure is significantly and positively moderated by media attention. Specifically, negative media evaluations have significant impacts on enterprises. The main findings remain valid even after conducting multiple robustness tests, such as the lag test, propensity score matching, instrumental variable method, and alternative measurements for the key variables. This study widens the theoretical research frontier of internal and external supervision mechanisms.