Long-run Effects Research Articles

Effects of regional network economies on industrial productivity in Japan: dynamic total factor productivity function approach

AbstractImproving productivity performance is essential for achieving regional economic sustainability. With the advent of the network society, regional economic agents have benefited not only from local within-region interactions but also from external out-of-region economies. However, it remains unclear whether localized external economies or spillovers of externalities through inter-regional networks are more significant in improving productivity performance. Therefore, this study examined the relationships between productivity performance and geographical externalities from an industry perspective using regional economic data for Japan and employed a dynamic total factor productivity function approach. It also assessed the impact of high-quality transportation infrastructure improvements on productivity catch-up. The results revealed the long-run effects of inter-regional networks on the productivity performance of industries. Furthermore, it revealed that, as a geographical externality, the “borrowed size” effect contributed significantly to productivity improvements in both manufacturing and non-manufacturing industries. These findings suggest that enhancing both high-quality transportation infrastructure and inter-regional transportation networks is likely to improve industry productivity performance.

Impact of greenhouse gas emission, renewable energy, and economic growth on health expenditure in Southeast Asia: A comparative analysis of econometric models

Purpose — The study explores the effects of greenhouse gas emissions, renewable energy, and economic growth on health expenditures across Southeast Asia while comparing the performance of different econometric models for accuracy in analysis.Method — To analyze the relationships among variables, the study employs three econometric models, the Autoregressive Distributed Lag Model, the co-integration Model, and the Quantile Regression Model, using annual data from 2000 to 2020.Findings — The results reveal that greenhouse gas emissions and GDP significantly influence health expenditure in all three models. However, the significance of renewable energy consumption varies, with only the quantile regression model indicating a significant relationship with health expenditure. Model comparison based on Mean Squared Error (MSE) suggests that the autoregressive distributed lag (ARDL) model provides the most accurate predictions. Also, it found that there is a short-run and long-run causal effect of GHG and GDP on health expenditure, as well as health spending on GDP.Implication — This study helps to understand how economic growth, environmental factors, and healthcare spending interact to develop sustainable policies to address health and environmental problems in Southeast Asia.Originality — This research contributes to the body of knowledge examining the impact of economic and environmental factors on health expenditures in Southeast Asia through a comparative analysis of different econometric models.

Do governance indicators have a role in remittances-growth nexus in Egypt?

Purpose ― Drawing on annual data from 1996 to 2022, this study aims to examine the effect of Egypt’s real GDP growth. Methods ― Autoregressive Distributed Lag (ARDL) and Cointegration technique are applied by first examining the stationarity of the series by utilizing the Augmented-Dicky-Fuller (ADF) unit root test. The bound cointegration test is then implemented to evaluate the existence of cointegration among the variables. Findings ― The results indicate that the GDP growth rate has a long-run positive relationship with remittance inflows in Egypt. This paper also finds that the average governance indicators in Egypt, which include government effectiveness, political stability, control of corruption and regulatory quality, voice and accountability, and the rule of law, could help facilitate the long-run effect of remittances on GDP growth. Implication ― The findings imply that maintaining high levels of governance indicators is essential for helping Egypt benefit from remittances and enhancing its economic growth.Originality/value ― The study is a pioneer in including the average governance indicators in the remittance-growth nexus study for Egypt. Its purpose is to assess whether governance quality affects the nexus and whether there exists a threshold for the average governance indicators below which the flow of remittances does not encourage economic growth.

Long-Run Effects of Trade Openness on Foreign Direct Investment: Evidence from Developed and Developing Countries

The purpose of this paper is to examine the long-run effects of trade openness on FDI for 124 developed and developing countries over the period 1996-2021. The econometric specification adopted is the ARDL model in Panel. The main results estimate that, for developed and developing countries, trade openness has a positive and significant long-run effect on FDI inflows; the long-run effect is more important for developing countries (8-13 times that of developed countries). For developing countries, the long-run effect of trade openness on FDI is greater than that of infrastructure quality (from 6.6 to 10 times). For all samples (whole, developed and developing countries), the short-run effects are insignificant. The results estimate, also, a bidirectional causality between trade openness and FDI for whole sample and for developed countries. In the light of these results, it is recommended for the government to make several strategies to attract trade: Reduce barriers for products and services, more transparency, reduce bureaucracy, create a good politic and economic environment, develop institutions, improve infrastructure and specially communication and technology.

The Long-Run Effects of Individual Debt Relief

Abstract Individuals with extensive debt may be granted debt relief in court. We provide a comprehensive evaluation of the Danish debt relief program with data from court records linked to nationwide register data. Using event-study methods and quasi-random assignment of applicants to court trustees with varying admission rates, we show that debt relief leads to a large increase in earned income, employment, assets, real estate, secured debt, home ownership, and wealth that persists for more than 25 years after a court ruling. The net transition of workers into employment accounts for two thirds of the increase in earned income.

The Long-Run Effects of Monetary Policy

Abstract We document that the real effects of monetary shocks last for over a decade. Our approach relies on (1) identification of exogenous and non-systematic monetary shocks using the trilemma of international finance; (2) merged data from two new international historical cross-country databases; and (3) econometric methods robust to long-horizon inconsistent estimates. Notably, the capital stock and total factor productivity (TFP) exhibit greater hysteresis than labor. When we allow for asymmetry, we find these effects with tightening shocks, but not with loosening shocks. When extending the horizon of the responses reported in several recent studies that use alternative monetary shocks, we find similarly persistent real effects, thus supporting our main findings.

Long-Run Effects of Childhood Exposure to Medical Marijuana Laws on Education and Labor Market Outcomes

Long-Run Effects of Childhood Exposure to Medical Marijuana Laws on Education and Labor Market Outcomes

Determinants of Foreign Investment in Indonesia Post-Pandemic

Research Originality: The Covid-19 pandemic brought out the phenomenon of a rapid increase in investment after it has ended in Indonesia. This study gives a significant contribution in analyze the impact of pandemic on foreign direct investment.Research Objectives: The aim of this research is to predict whether there is a relationship of interest rates, inflation, labor force, GDP, and exchange rate with investment.Research Methods: This research is also to examine the asymmetric relationship among variables using the NARDL (Nonlinear Autoregressive Distributed Lag) method to identify the long-run effects of these variables on the investment after the Covid-19 pandemic in Indonesia. It uses the secondary data from 1980-2022.Empirical Results: The results of research show that there is a long-run asymmetric effect of the variables of interest rates, GDP, and exchange rates on the foreign direct investment. It means that changes in these variable factors do not only affect the size of investment, but also the speed of its increase after the pandemic. Meanwhile, there is no asymmetric effect of the variables of labor force and inflation on the investment.Implications: This research provides a picture and new insights related to the foreign direct investment dynamics in Indonesia after the Covid-19 pandemic. This study implies that require a different policy approach in an effort to increase the investment in Indonesia.JEL Classification: F21, O40

The Impact of Real Exchange Rate and Gross Domestic Product on Trade Balance of Lao-Thailand

The objectives of this study are to analyze the effect of the real exchange rate of kip to baht and gross domestic product on the trade balance between Lao-Thai in both short-run and long-run effects. The time series data from 1990-2021 was usedand implied with the ARDL model. The stationary of each variable was tested by Augmented Dickey Fuller (ADF) method. The empirical analysis by the ARDL model show that there is a long-run relationship. In the long run, the real exchange rate and the gross domestic product of Thailand have a negative relationship with the trade balance at a statistical significance level of 0.01. Meanwhile, the gross domestic product of the Lao PDR has a positive relationship. In the short term, only the gross domestic product of Lao PDR has a negative relationship with the trade balance at a significance level of 0.05. The gross domestic product of Thailand has the most effect on the trade balance, followed by the gross domestic product of the Lao PDR and the real exchange rate of kip per baht has the least effect. The coefficient of speed in adjusting to the equilibrium point is equal to -0.784, which means that after shock, it will be able to adjust to the long run equilibrium by 78.4%.

Oil Price and Long-run Economic Growth in Oil-importing Developing Countries

The recent spikes in oil prices are a significant setback for the world economy, which has already faced multiple challenges due to the COVID-19 pandemic. This is particularly concerning for developing countries as maintaining a sustained growth in real GDP is crucial for lifting their population out of poverty. While the short-run negative macroeconomic effects of a spike in oil prices are well established in the context of the developed world, the long-run growth effect has received little attention, especially in developing countries. Using the World Bank's development indicators database covering the period 1990 to 2020, this study aims to investigate the oil price-growth nexus in low and middle-income net oil-importing countries to shed light on how oil price increases could be a challenge for sustainable development. Specifically, we first set up a theoretical model to establish the relationship between growth in output per capita and oil price. Following the traditional growth regression approaches, we empirically estimate the causal effect of growth in oil prices on the economic growth of 65 net oil-importing developing countries using fixed effect panel IV regression methods. The empirical results confirm statistically significant negative effects of oil prices, indicating that a higher oil price reduces long-run economic growth in oil-importing developing countries. Our results on the other determinants of growth are consistent with the existing empirical growth literature. Oil-importing developing countries, therefore, must allocate resources towards alternative domestic energy sources, in addition to pursuing fuel efficiency and conservation strategies, to mitigate the negative effects of oil price fluctuations on their long-run economic output and uphold sustainable development.

The impact of foreign direct investment inflows on unemployment and economic growth in West Africa

Purpose: This study explores the short- and long-run effects of foreign direct investment inflows (FDI) on both the unemployment rate and economic growth in West Africa utilizing a panel dataset spanning from 1991 to 2022. The precise impact of FDI on these variables and the underlying factors shaping this relationship in West Africa has not been definitively delineated. Previous literature has not exclusively delved into the impact of FDI on the unemployment rate in this region. Consequently, our paper endeavors to address this particular gap in knowledge concentrating on the individual countries within West Africa. Design/Methodology/Approach: We employ Pooled Mean Group (PMG) estimators and fixed effects models for our analyses. Findings: Our findings based on the PMG models unveil that FDI exhibits an insignificant positive long-term effect and a highly significant negative short-term impact on economic growth in West Africa. Similarly, we observe that the impact of FDI on the unemployment rate is negative both in the long- and short-term. Conclusion: Our findings demonstrate that various factors contribute to how FDI influences the unemployment rate and economic growth rate in West Africa. Research Limitation: The results of these models analyses are subject to the considered economic variables. Other economic variables could give different results. Practical Implication: The research findings imply that FDI cannot be relied upon as a comprehensive strategy to either stimulate economic growth or alleviate unemployment in the Western Africa region.

The Long-Run Impacts of Public Industrial Investment on Local Development and Economic Mobility: Evidence from World War II

Abstract This paper studies the long-run effects of government-led construction of manufacturing plants on the regions where they were built and on individuals from those regions. Specifically, we examine publicly financed plants built in dispersed locations outside of major urban centers for security reasons during the United States’ industrial mobilization for World War II. Wartime plant construction had large and persistent impacts on local development, characterized by an expansion of relatively high-wage manufacturing employment throughout the postwar era. These benefits were shared by incumbent residents; we find men born before WWII in counties where plants were built earned ${\$}$1,200 (in 2020 dollars) or 2.5 percent more per year in adulthood relative to those born in counterfactual comparison regions, with larger benefits accruing to children of lower-income parents. The balance of evidence suggests that these individuals benefited primarily from the local expansion of higher-wage jobs to which they had access as adults, rather than because of developmental effects from exposure to better environments during childhood.

Analysis of Value Added Tax Revenue in Indonesia from 1990 to 2022

In enhancing welfare and advancing Indonesia, the government plays a crucial role in promoting economic cooperation and implementing effective fiscal regulations, one of which is through optimizing revenue from the taxation sector. Value Added Tax (VAT) is a key tax instrument that serves as an important source of state revenue. As a significant tax instrument, VAT revenue plays several crucial roles, including supporting the state's fiscal revenue, funding infrastructure development, and providing public services. Therefore, this study aims to analyze the factors influencing VAT revenue in Indonesia. This research uses time series data covering the period from 1990 to 2022. The analytical method employed is the ECM (Error Correction Model) analysis to examine both long-run and short-run effects. The independent variables used in this study include Government Consumption, C-Efficiency, and Import Tariffs. Meanwhile, the dependent variable is VAT revenue in Indonesia. The results of this study show that government consumption and C-efficiency has a positive and significant impact on VAT revenue in both the long-run and short-run. Meanwhile, the import tariff variable negatively and significantly impacts long- run revenue, but has no effect in the short run.

Intellectual Monopoly and Income Inequality in the United States, 1948–2021: A Long-Run Analysis

Proponents of intellectual property claim that it fosters innovation and benefits companies and workers by increasing long-run growth. A growing body of literature challenges these claims by arguing that the cumulative nature of intellectual monopoly amplifies asymmetries between winners and losers. Intellectual monopolies pose disadvantages for countries, firms, consumers, and workers who struggle to maintain a leading position. Using data at the aggregate level from 1948 to 2021 in the United States, this article estimates the long-run effects of proprietary knowledge accumulation on income shares and tests the hypothesis that intellectual monopoly amplifies income inequality. The empirical evidence shows that companies in the United States transferred to wages a significant share of their profits from intellectual property. But these transfers have widened income inequality by benefiting the top 10 and top 25 percent, to the detriment of lower income brackets. Intellectual property alone can explain 23 percent of the increase in the income share of the top 10 percent in the 1948–2021 period. JEL Classification: O34, E25, C22

The impact of children's access to public health insurance on their cognitive development and behavior

While a large literature examines the immediate and long-run effects of public health insurance, much less is known about the impacts of total program exposure on child developmental outcomes. This paper uses an instrumental variable strategy to estimate the effect of cumulative eligibility gain on cognitive and behavioral outcomes measured at three points during childhood. Our analysis leverages substantial variation in cumulative eligibility due to the dramatic public insurance expansions between the 1980s and 2000s. We find that increased eligibility improves child cognitive skills and present suggestive evidence on better behavioral outcomes. There are notable heterogeneous effects across the subgroups of interest. Both prenatal eligibility and childhood eligibility are important for driving gains in the test scores at older ages. Improved child health is found to be a mediator of the impact of increased eligibility.

Labour market skills, endogenous productivity and business cycles

This paper analyses how labour market heterogeneity affects unemployment, productivity and business cycle dynamics. To this aim, we set up a model with asymmetric search and matching frictions across skilled and unskilled workers, and endogenous productivity through R&D investment and intangible capital accumulation. Skill mismatch and skill-specific labour market institutions have three main effects on business cycles and growth dynamics. First, the relative scarcity of skilled workers increases the natural rate of unemployment and reduces total factor productivity with long-run effects on the growth rate of output. Second, skill heterogeneity in the labour market generates asymmetric outcomes and amplifies measures of employment, wages and consumption inequality. Finally, the model provides important insights for the Phillips and Beveridge curves. Incorporating skill heterogeneity leads to a flattening of the Phillips curve as wages and unemployment respond unevenly across skill types. Also, the model generates sideward shifts of the Beveridge curve following business cycle shocks, with the extent of these shifts depending on the degree of skill heterogeneity.

Trade Liberalization and the Performance of the Manufacturing Subsector in Nigeria

Trade liberalization is a widely accepted policy for fostering economic growth, particularly in developing countries. Advocates argue that open economies, through increased competition, specialization, and access to global markets, outperform closed economies. However, the short-term effects on developing economies like Nigeria remain debated, especially within the manufacturing sector. Nigeria's trade policy has fluctuated between protectionism and openness, significantly influencing its manufacturing performance. Critics, drawing from dependency theory, argue that liberalization exposes weaker economies to exploitation by stronger nations, leading to trade imbalances and inhibiting industrial growth. This study investigates the nonlinear effects of trade liberalization on Nigeria’s manufacturing sector, addressing a gap in the literature by employing a quadratic approach to determine threshold effects. By incorporating a quadratic form of the trade variable, the study tests the hypothesis that trade liberalization initially boosts the manufacturing sector but results in diminishing returns as openness intensifies. The research is framed within the Laffer Curve of Trade, suggesting that beyond a certain threshold, excessive openness may harm the manufacturing sector. The AutoRegressive Distributed Lag (ARDL) model is used to assess both short-run and long-run effects, with findings indicating a convex relationship between trade liberalization and manufacturing output, highlighting the critical importance of identifying optimal policy thresholds to maximize industrial growth.

What’s in the water? Long-run effects of fluoridation on health and economic self-sufficiency

Community water fluoridation has been named one of the 10 greatest public health achievements of the 20th century for its role in improving dental health. Fluoride has large negative effects at high doses, clear benefits at low levels, and an unclear optimal dosage level. I leverage county-level variation in the timing of fluoride adoption, combined with restricted U.S. Census data that link over 29 million individuals to their county of birth, to estimate the causal effects of childhood fluoride exposure. Children exposed to community water fluoridation from age zero to five are worse off as adults on indices of economic self-sufficiency (−1.9% of a SD) and physical ability and health (−1.2% of a SD). They are also significantly less likely to graduate high school (−1.5 percentage points) or serve in the military (−1.0 percentage points). These findings challenge existing conclusions about safe levels of fluoride exposure.

Effects of Conflicts on Labor Market Outcome and Intimate Partner Violence: Evidence from Nepal

This study investigates the impact of conflict intensity on married women’s employment and intimate partner violence (IPV) in Nepal during and after the civil conflicts. Analyzing five waves of the Nepal Demographic and Health Survey, it reveals a negative short- and long-term effect of conflict on work probabilities for women facing reduced economic opportunities and delayed human capital accumulation. However, this result masks substantial heterogeneity by subgroups. The older cohort experiences a temporary negative effect, while the impact is enduring for younger cohorts. The long-run effect of conflict intensity was more sustained for married women who were children or teenagers at the onset of the war compared to older cohorts. These results hold under IV regressions. Data availability restricts our analysis of IPV to the post-war years. The study does not find a direct impact of conflict on the stated IPV experiences of married women but identifies an indirect effect. HIGHLIGHTS Conflict in Nepal affects women’s employment and intimate partner violence. Women’s employment increased during the conflict but declined post-conflict. Conflict intensity in Nepal reduced long-term employment, particularly for younger women Intimate partner violence shows indirect rise due to reduced women’s employment. The added-worker effect in Nepal was weak, with conflict disrupting labor opportunities.

Influence of vaccination on COVID-19 reproduction rate: Time trends and persistence analysis

This paper aims to study how the increase in vaccination rate in Israel affect to the behavior of COVID-19 reproduction rate, from 19 December 2020, to 25 April 2021. Multiple advanced econometrics methodologies are used to analyze the degree of persistence, to understand the relationship between these two times series and the long-term behavior. The results of our study indicate that the vaccinations cause long-run effects to COVID-19 reproduction rate and the vaccination provides useful information to predict the COVID-19 reproduction rate. Also, we determine whatever exogenous shocks related with the virus reproduction will have a very short impact over time. The first change in trend occurs on 13 January 2021, with 24.37% of the population vaccinated and when it can be seen that the increased rate of vaccinations causes the infection rate to decrease.