non-OECD Countries Research Articles

How do the Banking Systems of High Income Countries differ from others?

In this study, first we look at the relation between countries’ income levels and their banking systems. What are the differences between richer countries and other countries in terms of their banking systems? Then, we look at how OECD membership affects the banking system of a country. When we compare High-Income countries to Middle- and Low-Income countries, we find that workers’ remittances are much higher in Low- and Middle-income countries. The banking industries are much more concentrated in High-Income countries. Bank deposits are also significantly higher in these countries. The banking systems in these countries have more risk compared to their counterparts in other countries. Non-resident banks are more active in High-Income countries. Also, there is more interest in offshore accounts and the banks are more engaged in international transactions. When we compare high-income OECD-member countries to high-income Non-OECD-member countries, we find that the banking industries in high-income Non-OECD-member countries are much more concentrated when compared to their counterparts in High-Income OECD countries. In High-Income Non-OECD countries, non-resident banks are more active and there is more interest in offshore accounts. On the other hand, bank deposits are higher in High-Income OECD countries. But, the banks in these countries are in greater risk compared to the banks in Non-OECD countries (i.e. liquid liabilities are higher). We conclude that policymakers need to consider OECD membership and income level as determinants of a country’s banking system.

Social Protection During COVID-19 Crisis in India, Especially Among Vulnerable Populations

Over the last 20 years, India’s per capita income has quadrupled, and its poverty has declined at a similar rate17. Despite a significant increase in government spending on social protection, India spends under 3% of its gross domestic product (GDP) on social safety-net programs whereas OECD (Organization for Economic Co-operation and Development) and non-OECD Asian countries spend up-to 15% and 6% of their GDP on similar social protection programs respectively14. The key markers of effective social protection are an expansion of good jobs, maintaining human capital, and offering equal opportunities. Unfortunately, the health sector in India is considerably under-funded with competing priorities of infectious diseases, a growing tide of non-communicable diseases, and continued hammering of natural disasters given the vulnerability of its geographic location19. In 2015, India was among the top three disaster-hit countries, which led to economic damages worth $3.3 billion16. With a pandemic like COVID-19, these cascading risks push India’s vulnerable low and middle class into abject poverty, anxiety, and an at-risk future15. One of the starkest stories of our era belongs to the year 2020 where the novel coronavirus has disrupted normalcy, hijacked social protection from a policy standpoint, and crippled the achievements towards 2030 agenda of sustainable development goals (SDGs). Both the disease and lockdown have caused immense human and economic costs to the country. Although it is too early to measure the extent of human cost and suffering, the economic cost is trending in a negative direction. Although the future looks hazy at best, addressing this crisis within the lens of social protection is prudent and ethical13. This may be the only viable pathway to stop India from an impending catastrophic downfall.

Climate Finance and Emission Reductions: What Do the Last Twenty Years Tell Us?

In the framework of the Paris Agreement implementation, financial transfers remain a major point of negotiation for addressing equity concerns raised by the ambitious climate objectives. In complement to the theoretical, experimental and numerical studies that have examined the role of transfers in facilitating coalitions, we conduct the first empirical analysis of their impact on national carbon emission reductions. We build on the existing literature to develop a conceptual framework which models continuous national emission choices in the presence of financial transfers. We infer an equation of the impact of mitigation and adaptation finance on national emissions of recipient countries. We test the derived hypothesis using carbon emissions data of non-OECD countries in the last 20 years. We find that public adaptation and mitigation finance tend to increase emissions. Private mitigation finance seems to reduce them only after five years following the transfers.

Serenity Now! The (Not So) Inclusive Framework and the Multilateral Instrument

The Article demonstrates, based on publicly available data and using a variety of indicators that the most salient initiatives to promote inclusivity within the international tax regime (Country-by-Country Reporting, the Multilateral Instrument, and the Inclusive Framework) have at best done little to increase the meaningful participation of non-OECD countries in the regime, and at worst been disingenuous. The opacity of the examined initiatives and the difficulty of measuring inclusivity dictated this indirect methodology, yet the picture it portrays is unambiguous. The article finally explain why the OECD invited non-Member States to join these initiatives, and why the latter have nominally joined, using Hirschman’s exit and voice framework. Based on this analysis, It concludes that the problems that led to the initiation of inclusive fora within the international tax regime will not “go away” with such nominal inclusivity, and that only meaningful inclusivity has the chance to stabilize the international tax regime.

The Stability of The Financial System: a Comparison of Developed and Less Developed Countries

In this study, we examine the relationship between the development level of a country and stability of its financial system. We look at seven measures of stability. These are Bank z-score, Bank non-performing loans to gross loans, Bank capital to total assets, Bank credit to bank deposits, Regulatory capital to risk-weighted assets, Liquid assets to deposits and short term funding, and Provisions to non-performing loans. First, we compare developed and less developed countries’ stability measures. Do developed countries have more stable financial systems than less developed countries or is the opposite true? When we compare high-income countries to low- and middle-income countries, we find that low- and middle-income countries have better “stability” values in five measures. For the other two measures, we do not find any significant difference between the two groups. Then, we look at how high-income OECD countries differ from high-income non-OECD countries in terms of their financial system’s stability. When we compare high-income OECD-member countries to high-income Non-OECD-member countries, we find that high-income Non-OECD-member countries have better “stability” values in four measures. For the other three measures, we do not find any significant difference between the two groups. We conclude that developed countries, especially OECD members, are under greater risk when facing an economic/financial crisis.

THE IMPACT OF TRADE CONFLICT ON MONETARY POLICY IN TARGET ECONOMIES

The nexus between trade conflict and monetary policy is of great importance in international political and economic analysis. By employing data from a panel of global countries covering the period 2000–2015, this paper empirically analyzes the impact of trade conflict on monetary policy and how it works. We document the evidence that trade conflict has caused targeted countries to implement loose monetary policy. We also find that the impact of trade conflict is not only effective in the current year, but also continues in the next five years. In addition, we show that the significant impact on monetary policy is manifested in non-OECD countries and transition countries but not in OECD countries and non-transition countries. Consequently, we believe our findings should shed light on those policy makers in target countries, who can hopefully prepare for potential trade conflict and avoid similar disputes from interfering with the effectiveness of monetary policies in the domestic economy by providing practical currency and valuation strategies.

The Role of Institutional Quality on Participation in Global Value Chains

We explore the effect of institutional quality on participation in global value chains (GVCs) by distinguishing between backward and forward participation. Using a sample of 63 OECD and non-OECD countries during the period 2005–2015, the results obtained from a panel data estimation are twofold. First, we obtain a positive association between institutional quality and participation in GVCs, with slightly greater effects for backward than for forward participation. Second, we find that results are sensitive to the dimension of the institutions considered, with Voice and Accountability being associated with more backward participation, and Rule of Law and Political Stability with more forward participation

Productive knowledge, economic sophistication, and labor share

We present economic sophistication, the ability to produce complex products, as a potential determinant of labor share. Economic sophistication requires specific skills and tacit knowledge embedded in labor. It increases the bargaining power of workers, resulting in a higher labor share. We are the first to present economic sophistication as a potential determinant of labor share. We employ a fixed-effect model using panel data from 98 countries observed from 1970–2015 to find that economic sophistication has a positive and statistically significant effect on labor share. This positive effect applies to both OECD and non-OECD countries. A one standard deviation increase in economic sophistication increases labor share by about 3 percent, which corresponds to about 1.6 percentage points increase relative to the mean. Further, we show that economic sophistication and human capital have a substantial interaction effect that varies across OECD and non-OECD countries.

Does military spending stifle economic growth? The empirical evidence from non-OECD countries

Undeniably, peace and long-term sustainable economic development are the prime agenda of all countries. This study aims to empirically evaluate the impact of military spending on economic growth for a panel of 35 non-OECD countries over 1988–2019. A multivariate regression model based on the augmented production function is used to achieve the objective of the study. The panel autoregressive distributed lag (ARDL)/pooled mean group (PMG) technique is employed, while, in addition the robust least squares and fixed-effect estimators are implemented for the robustness of the results. This study found a clear negative effect of military spending on economic growth. The pairwise Dumitrescu Hurlin panel causality test results exhibit bi-directional causality between military expenses and economic growth. Overall, these estimates provide strong support that military expenditure is not beneficial rather detrimental to economic growth. The empirical findings of this study suggest that policymakers need to redesign the military budget to stimulate economic growth and improve social welfare.

The Environmental Kuznets Curve: A Semiparametric Approach with Cross-Sectional Dependence

This paper proposes a new approach to examine the relationship between CO2 emissions and economic developing. In particular, we propose to test the Environmental Kuznets Curve (EKC) hypothesis for a panel of 24 OECD countries and 32 non-OECD countries by developing a more flexible estimation technique which enables to account for functional form misspecification, cross-sectional dependence, and heterogeneous relationships among variables, simultaneously. We propose a new nonparametric estimator that extends the well-known Common Correlated Effect (CCE) approach from a fully parametric framework to a semiparametric panel data model. Our results corroborates that the nature and validity of the income–pollution relationship based on the EKC hypothesis depends on the model assumptions about the functional form specification. For all the countries analyzed, the proposed semiparametric estimator leads to non-monotonically increasing or decreasing relationships for CO2 emissions, depending on the level of economic development of the country.

‘On the Road Again’: A 118 country panel analysis of gasoline and diesel demand

Abstract The current paper contributes to the literature on the relationship between economic growth, fuel prices, and the demand for gasoline and diesel within the transportation sector by assembling a wide panel dataset of fuel consumption and prices for 35 OECD and 83 Non-OECD countries. The unbalanced data spans 1978–2016, with the full 39 years of data for 36 countries. In addition, our dynamic panel estimates address nonstationarity, heterogeneity, and cross-sectional dependence. The OECD panel price elasticity for gasoline is around −0.7 or about three times that for the non-OECD panel; whereas, the OECD price elasticity for diesel is only modestly larger (in absolute terms) than the non-OECD elasticity (−0.3 and −0.2, respectively). For gasoline, the non-OECD GDP elasticity is around 1.0 or about twice that for OECD countries. For the OECD panel, the diesel GDP elasticity is about three times that of the OECD GDP elasticity for gasoline; whereas, for the non-OECD panel, the two GDP elasticities (for gasoline and diesel) are about the same. For non-OECD countries, subpanels based on geography and income produced mostly similar results. We found no evidence of GDP or price asymmetric effects for the 1978–2016 period. Lastly, the large (at least for the OECD panel) and statistically significant transportation price elasticities reported here provide stark contrast to the economy-wide energy price elasticities calculated in Liddle and Huntington (2020a).

The effect of renewable and non-renewable energy consumption on economic growth: Non-parametric evidence

We employ a non-parametric modelling technique to examine the time-varying impact of renewable and non-renewable energy consumption on economic growth. The specific nonparametric method that we employ is the local linear dummy variable estimation (LLDVE) method, which we apply to OECD and non-OECD panels for the period 1990 to 2015. While previous studies employing parametric models have recognised the existence of non-linearities and instability in the relationship between renewable (and non-renewable) energy consumption and economic growth, the LLDVE method has the advantage that it does not make any assumptions about functional form and, hence, is better able to approximate the non-linear relationship. Our estimates suggest that non-renewable energy consumption exerts a positive and significant impact on economic growth across OECD nations with the coefficient function exhibiting an upward trajectory over time. The impact of renewable energy consumption on economic growth, however, is statistically indistinguishable from zero in these countries for most of the study period. Both renewable and non-renewable energy consumption promote economic growth in non-OECD countries, suggesting that developing countries may play an important role in the transition process to renewables despite constraints in technical progress.

Fettered cross-border capital flows, external finance dependence, and international trade

The effects of capital controls on international trade have not been thoroughly examined empirically. Using bilateral industry-level export data across a large number of countries, this paper evaluates how capital controls affect exports. We identify the effect of capital controls on export activities by exploiting the variation in capital controls across countries and variation in external finance dependence across industries. While we find that capital controls adversely affect total exports, analyses of the export margins indicate that the export distorting effect of capital controls works by deterring single and multiple export market entries by exporters, reducing export intensities of exporters, and the range of goods exporters can ship to each market destination. Further analysis in the paper reveals that the export distorting effects of capital controls is invariant of whether the restriction is on inward or outward capital controls, although the relative impact of inward capital control is higher. We also find that capital controls distort exports in OECD and non-OECD countries, although the effect is higher for non-OECD countries. We discuss the policy implications of the findings.

The Size of the Public Economy and Its Economic Efficiency Problem

The public economy, which has reached a significant size in terms of both quality and quantity, collects and spends resources between 30% and 70% of GDP on average, shapes up the economy, and acts as a complementary element next to the private sector. Therefore in this study, the relationship between the size of the public sector (its spending) and its efficiency was analyzed. For this purpose, a 24-year data of the period, 1995 to 2018, were evaluated. In this context, a comparison was made between the data of 36 OECD-member countries and seven non-OECD countries. In conclusion, it was seen that, since OECD-member countries are generally high-income countries, public expenditures in those countries are far from populism and are used effectively in order to meet the social needs. On the other hand, in developing countries, since the growth in the public expenditures tends towards mostly public goods and services in which political actors are given priority, the efficiency either remains limited or is negative.

Predictors of (in)efficiencies of Healthcare Expenditure Among the Leading Asian Economies - Comparison of OECD and Non-OECD Nations.

PurposeThe goal of this study was to assess the effectiveness of healthcare spending among the leading Asian economies.MethodsWe have selected a total of nine Asian nations, based on the strength of their economic output and long-term real GDP growth rates. The OECD members included Japan and the Republic of Korea, while the seven non-OECD nations were China, India, Indonesia, Malaysia, Pakistan, the Philippines, and Thailand. Healthcare systems efficiency was analyzed over the period 1996–2017. To assess the effectiveness of healthcare expenditure of each group of countries, the two-way fixed effects model (country- and year effects) was used.ResultsQuality of governance and current health expenditure determine healthcare system performance. Population density and urbanization are positively associated with a healthy life expectancy in the non-OECD Asian countries. In this group, unsafe water drinking has a statistically negative effect on healthy life expectancy. Interestingly, only per capita consumption of carbohydrates is significantly linked with healthy life expectancy. In these non-OECD Asian countries, unsafe water drinking and per capita carbon dioxide emissions increase infant mortality. There is a strong negative association between GDP per capita and infant mortality in both sub-samples, although its impact is far larger in the OECD group. In Japan and South Korea, unemployment is negatively associated with infant mortality.ConclusionJapan outperforms other countries from the sample in major healthcare performance indicators, while South Korea is ranked second. The only exception is per capita carbon dioxide emissions, which have maximal values in the Republic of Korea and Japan. Non-OECD nations’ outcomes were led by China, as the largest economy. This group was characterized with substantial improvement in efficiency of health spending since the middle of the 1990s. Yet, progress was noted with remarkable heterogeneity within the group.

Identifying the impacts of income inequality on CO2 emissions: Empirical evidences from OECD countries and non-OECD countries

The emergence of environmental quality challenges is rooted in social problems, which mainly come from income inequality and power gap. Income inequality and climate change have been highlighted as hindering the achievement of sustainable development and environmental protection globally. Though existing literature has estimated the influences of income inequality on CO2 emissions, relatively little is known about the long-run and short-run effects from a cross-national perspective. Therefore, the aim of this study is to shed light on the long-run and short-run relationships between income inequality and per capita CO2 emissions based on balanced country-level panel dataset for 78 countries from 1990 to 2017. In order to understand how a country’s economic level affects the link between inequality and CO2 emissions, this study classified the sample countries into three groups: OECD countries, low-income non-OECD countries, and high-income non-OECD countries. The FMOLS and DOLS model is applied to examine the relationship between the income inequality and per capita CO2 emission, meanwhile the estimates of an ARDL model revealed the long-run and short-run effects. Our empirical results indicate that there is a long-term cointegration relationship between income inequality and per capita CO2 emissions. Higher income inequality promotes emission reductions in OECD countries and high-income non-OECD countries, while the influences are insignificant in low-income non-OECD countries in the long run. Per capita income, carbon intensity, population size and urbanization were also considered in this study. The estimates of an ARDL model indicate that whilst income inequality does not have a significant impact on CO2 emissions in the short run, per capita national income positively affects CO2 emissions, meaning that income growth will accelerate emissions. Carbon intensity positively affects CO2 emissions in the long term, indicating that increased income facilitates increased energy use and emissions, but that progress in CO2 recycling technology may ultimately reduce emissions. Neither population size nor urbanization rate exerted any obvious effects on per capita CO2 emissions. From a policy perspective, governments have an onerous task ahead of them in balancing economic efficiency and distributary justice. Lastly, we provide insights for policy makers that in order to realize the goal of emission reductions in the long run, it may be best to proceed by making reasonable national income redistribution policies and by adjusting the welfare system.

An empirical analysis of energy intensity and the role of policy instruments

The reduction of energy intensity is important for sustainable economic growth, especially in non-OECD countries where energy demand growth is high. Understanding the impact of policies on energy intensity can help policy-makers to reduce energy intensity. Using empirical methods and cross-country data from 44 countries over the period 1990–2016, we study the determinants of energy intensity. The common correlated effects mean group estimator is employed since it addresses nonstationarity, cross-sectional dependence, and heterogeneity—all three of which exist in the data. Both GDP per capita and economy-wide energy prices are shown to be negatively associated with energy intensity. The empirical results provide evidence that several policy instruments are effective in reducing energy intensity: (i) standards, and labeling; (ii) government direct investment; (iii) strategic planning and support; (iv) fiscal measures/taxes; and (v) grants and subsidies. The duration of the policy is more important than the mere existence of the policy in demonstrating the policy's effectiveness.

Income Concentration and Economic Growth in the Neoliberal Period (1980-2014)

Fiscal reforms, which were the result of neoliberal economic policies, have led many countries to higher levels of inequality since the 1980s. This paper shows that the impact of income concentration on economic growth is both positive and negative, depending on the degree of accumulation. A positive relationship is observed when the concentration is moderate, but, when it becomes extreme, its impact turns negative. This trend is reflected in an inverted U-shaped curve. Using a GMM model, for a sample of 31 countries, it is found that the curve undergoes a change of direction when the 99th percentile accounts for approximately 24-26% of the total national income (this turning point is lower for OECD countries [14%] than for non-OECD countries [28%]). Also, the slopes suggest that the negative effects are much greater (about twice) than the positive ones.

Probabilistic Analysis of Dam Accidents Worldwide: Risk Assessment for Dams of Different Purposes in OECD and Non-OECD Countries with Focus on Time Trend Analysis.

This study presents probabilistic analysis of dam accidents worldwide in the period 1911-2016. The accidents are classified by the dam purpose and by the country cluster, where they occurred, distinguishing between the countries of the Organization for Economic Cooperation and Development (OECD) and nonmember countries (non-OECD without China). A Bayesian hierarchical approach is used to model distributions of frequency and severity for accidents. This approach treats accident data as a multilevel system with subsets sharing specific characteristics. To model accident probabilities for a particular dam characteristic, this approach samples data from the entire data set, borrowing the strength across data set and enabling to model distributions even for subsets with scarce data. The modelled frequencies and severities are combined in frequency-consequence curves, showing that accidents for all dam purposes are more frequent in non-OECD (without China) and their maximum consequences are larger than in OECD countries. Multipurpose dams also have higher frequencies and maximum consequences than single-purpose dams. In addition, the developed methodology explicitly models time dependence to identify trends in accident frequencies over the analyzed period. Downward trends are found for almost all dam purposes confirming that technological development and implementation of safety measures are likely to have a positive impact on dam safety. The results of the analysis provide insights for dam risk management and decision-making processes by identifying key risk factors related to country groups and dam purposes as well as changes over time.

Why do local institutions matter? The political economics of decentralisation

In the last decades, decentralization reforms have often come to the fore of the policy debate in both OECD and non-OECD countries. In spite of the many theorised virtues, these reforms might fail to deliver when local institutions are too weak to guarantee higher accountability of local policy-makers to constituents. To support this argument, this paper analyses the political economics of decentralization reforms in three countries (Burundi, Brazil and Belgium) that differ in terms of their stage of development as well as the “intensity” of their decentralized institutions. In unstable political settings—like those characterising post-conflict countries—, decentralization may fail if leaders exploit entrenched rivalries to weaken local institutions and compete unfairly for power. In more stable settings, decentralization may entail coordination costs that prevent local leaders to jointly provide a decentralized public service and even create incentives for free-riding. Local political dynamics may exacerbate these coordination costs, with collusion among politically aligned leaders blurring their accountability to citizens and leading to lower-quality public services.