Poisson Pseudo Maximum Likelihood Research Articles

Does infrastructure facilitate trade connectivity? Evidence from the ASEAN.

This paper explores the impact of infrastructure on trade connectivity among ASEAN and three Asian countries—India, China, and Japan. Our study is mainly motivated by the increased infrastructure investment and trade among these countries in recent years. The main results of trade network analysis include high trade density and interconnectedness among ASEAN, India, China, and Japan. There are specific “trade intensive paths” among the few countries in the group. It highlights the “export hubs” or main “suppliers of intermediate goods” in the region. Further, the paper analyzed the nexus between trade connectivity and infrastructure by applying the panel fixed effects method and Poisson pseudo-maximum likelihood. Moreover, the robustness of the results is tested by estimating two-stage least square. Hard infrastructure, foreign direct investment plays a crucial role in bringing the nexus to trade connectivity. Reducing trade barriers and improving infrastructure quality are essential for deepening regional trade integration.

A gravity model analysis of international migration from BRIC to OECD countries using Poisson Pseudo-maximum likelihood Approach

This article postulates an inclusive study on the international migration from Brazil, Russia, India and China (BRIC) countries to developed world (OECD Countries). This study used the data on BRIC during the period 2000–2013 to investigate the interaction between trade, foreign direct investment (both inward and outward) along with international migration in single framework. The results are obtained by using panel fixed effects and Poisson Pseudo-maximum likelihood (PPML) approach to cater heterogeneity issue. These results indicate that common official languages, trade and FDI significantly encourage international migration, indicating complementary relationship. The GDP of host nations is very important and encouraging factor for BRIC's migrants referring it as, most serious push factor of migration.

Do regional trade agreements promote international trade? New empirical evidence from the East African Community

Using an extended gravity model that corrects for zero trade, endogeneity and heterogeneity, we empirically investigate whether regional trade agreements (RTAs) promote trade. The model was estimated using a comprehensive panel dataset of the East African Community (EAC) from 1990 to 2017 and applying the Poisson Pseudo-Maximum Likelihood estimator. Empirical results show that RTAs have enhanced trade within the EAC regional bloc, but the impact varied across countries and sectors. We find that RTAs have led to an increase in imports from and exports to non-bloc countries, and this impact persists after 12 years. Our empirical findings are robust to alternative model specifications. Exploiting RTAs policy implication, this paper provides new empirical evidence highlighting that promoting RTAs could promote trade in the East African Community.

Do Institutional Characteristics of Microfinance Institutions Matter for External Sources of Funds? Evidence from Bangladesh

This study mainly aims to examine whether the institutional characteristics matter for external sources of funds of microfinance institutions (MFIs) in Bangladesh considering unbalanced panel data of 258 MFIs for the period of 2009-2014. The study considers four institutional characteristics of MFIs, namely, the number of branches, profitability measured by return on assets, location, and age of MFIs as well as several macroeconomic variables such as interest rate cap, economic growth, and inflation. The external sources of funds are decomposed into five sub-panels, that is, government funds, loans from commercial banks, loans from Palli Karma Sahayak Foundation, donors' funds, and loans from other MFIs in order to draw more conclusive evidence. It also helps provide a comparative analysis on the effects of each institutional characteristic of MFIs on different types of external sources of funds. The study employs the Poisson pseudo maximum likelihood method which is supposed to be more appropriate in the present case for avoiding the problem associated with zero value of dependent variable. The estimation results suggest that institutional characteristics of the MFIs contribute considerably in supporting the growth and development of the industry by drawing funds from external financial sources albeit some indicators of institutional characteristics refer to adverse impact on a few external sources of funds. In the case of macroeconomic factors, market intervention through the interest rate cap limits the operation of microfinance institutions making funds scarce for them. Additionally, the comparative analysis of alternative funding both from the debt and equity sources will help policymakers and managers to adopt an appropriate policy to attain the cost-effectiveness of MFIs of Bangladesh which is one of the important policy implications of the study.

Measuring trade creation effects of free trade agreements: Evidence from wine trade in East Asia

East Asia has experienced an unprecedented expansion in its wine market over the past two decades. This paper examines the extent to which import tariff reductions through bilateral free trade agreements (FTAs) have contributed to an increase in wine imports to Japan, China, and South Korea. Our empirical method involves estimating an augmented version of the gravity equation by the Poisson pseudo-maximum likelihood (PPML) technique. Analyzing a panel dataset for 1990–2016 covering 27 exporters, we find that overall a 1 percentage point reduction in tariff among FTA member countries is associated with an increase in the wine import volumes by 0.042%, which is seven times higher than a similar reduction in tariff on an MFN basis. The strongest trade creation effects are founded for bottle wine. The results are robust to various specifications.

Trade facilitation and firms exports: Evidence from customs data

Using Egypt firm-level customs data and the World Bank Doing Business data for the period 2005–2016, this paper investigates the impact of administrative barriers to trade on firms’ exports. A gravity model is used, and a Poisson-Pseudo Maximum Likelihood regression is estimated to account for the significantly large share of zero trade flows in our dataset. Our findings confirm that time to trade can be perceived as a fixed and a variable cost that affects both the extensive and the intensive margins. At the sectoral level, we find that while agriculture and manufacturing are affected by time delays, fuel is not. Perishable and seasonal products are found to be more sensitive to time to trade than other products. Finally, findings by firms’ size show that superstars are more adversely affected by administrative barriers to trade than small and medium exporting firms.

Inclusive Finance, Environmental Regulation, and Public Health in China: Lessons for the COVID-19 Pandemic.

The slow-down of the Chinese economy and the depression in the global economy during the COVID-19 show that governments should provide stimulus packages. These policies should be inclusive in terms of financial gains. Using the panel data of 30 regions in China from 2006 to 2016, this paper uses the Poisson Pseudo-Maximum Likelihood (PPML) estimator to analyze the impact of inclusive finance on public health. The results show that inclusive finance has a significant positive effect on public health. The performance of the eastern region is significantly better than that of the central and western regions. When we consider the combined effect of environmental regulation, the improvement effect of inclusive finance on public health is still significant, and the coefficient increases in the eastern region. Similarly, there is also a significant improvement effect in the central and western regions. Our findings reveal that environmental regulation promotes the beneficial effect of inclusive finance. Therefore, it is important to improve the inclusive financial development mechanism and enhance environmental regulation intensity for solving public health issues. Lessons related to the COVID-19 pandemic are also discussed.

Corporate Accountability Towards Species Extinction Protection: Insights from Ecologically Forward-Thinking Companies

This paper contributes to biodiversity and species extinction literature by examining the relationship between corporate accountability in terms of species protection and factors affecting such accountability from forward-thinking companies. We use triangulation of theories, namely deep ecology, legitimacy, and we introduce a new perspective to the stakeholder theory that considers species as a ‘stakeholder’. Using Poisson pseudo-maximum likelihood (PPML) regression, we examine a sample of 200 Fortune Global companies over 3 years. Our results indicate significant positive relations between ecologically conscious companies that are accountable for the protection of biodiversity and species extinction and external assurance, environmental performance, partnerships with socially responsible organizations and awards for sustainable activities. Our empirical results appear to be robust in controlling for possible endogeneities. Our findings contribute to the discussion on the concern of species loss and habitat destruction in the context of corporate accountability, especially in responding to the sixth mass extinction event and COVID-19 crisis. Our results can also guide the policymakers and stakeholders of the financial market in better decision making.

What lessons can Africa learn from the social determinants of COVID-19 spread, to better prepare for the current and future pandemics in the continent?

This paper examines the determinants of the spread of coronavirus disease 2019 (COVID‐19) in Africa, based on the framework of social determinants of health. Applying Poisson Pseudo Maximum Likelihood (PPML) and quantile regressions to panel data and country‐specific socioeconomic background data from 53 African countries, the study finds that enhancing capacity for early testing helps for timeous uncovering of cases, early isolation and contact tracing for effective control of the spread. Other factors such as managing of international movements through reduction of international exposure and ensuring better sanitation and hygiene were found to be relevant in diminishing COVID‐19 spread, whereas alcohol consumption and population density heighten the spread. The work also highlights that stringent measures will be counter‐productive unless they are coupled with measures to create and preserve livelihoods, together with humanitarian relief assistance to the poorest segments of the population. The results are robust to alternative techniques. As policy recommendations, we implore African governments to the promotion of sustainable livelihoods and social safety nets as measures to accompany stringent lockdowns; and good sanitation programmes to become a lifestyle of citizens. Careful attention should be paid to the socioeconomic trade‐off in respect of international travel restrictions given the high dependence of most African economies on tourism.

Effect of Trade Liberalization on Asymmetric Countries for Homogenous and Differentiate Product: Case of Pakistan-China Free Trade Agreement

The study performs an empirical test to assess the impact of the Pakistan-China Free trade agreement (FTA) on Pakistan, China, and the World's exports under homogenous and differentiated products. This study employs the modeling with Poisson specification with Poisson Pseudo-Maximum Likelihood method for the estimations. The results of empirical test show that the effect of FTA on the FTA and Non-FTA countries is greater in the differentiated product as compared to the homogenous product. Therefore, one of the most important policy implications provided by this study is that export enterprises need to concentrate on differentiated products as compare to the homogenous products after the implementation of the Pakistan-China FTA. Moreover, the previous literature concluded that Pakistan-China FTA was more beneficial for China as compared to Pakistan. However, according to this study, if Pakistani enterprises focus more on differentiated products as compared to homogenous products, then it will be equally beneficial for both Chinese and Pakistani enterprises. This study will contribute to the literature by considering the Bertrand competition between asymmetric countries and find out the effect of the FTA on these three countries. It considers China, Pakistan, and the Rest of the World as first, second, and third countries.

Ex-post assessment of heterogenous effects of trade agreements: the case of Turkey

Purpose -Free trade agreements (FTA) are prominent features of international trade. The proliferation of FTAs over the past 20 years is one of the most prominent aspects of the global economy. Turkey has also signed many FTAs in this period on the basis of obligations stemming from customs union with European Union. FTAs aim to increase trade flows and welfare through liberalizing trade and achieving a deeper integration between partners. In this respect, FTAs are getting more and more important as international trade is a crucial tool to boost the economic development. Indeed, getting the utmost benefit from FTAs is very important for Turkey and other developing countries. Regarding the increasing importance of FTAs, the ex-post effects of FTAs on Turkey’s trade are examined in this paper. Methodology -In the light of recent techniques, structural gravity model is used in this study. Trade data used consists of aggregate trade flows among pairs of 90 countries from 1988-2016, 29 years in total. As the estimation technique, Ppml_panel_sg command is used. This is an estimation command for Poisson pseudo-maximum-likelihood (PPML) regression for panel gravity models with time varying importer and exporter fixed effects and time invariant pair fixed effects. Findings-The results indicate the econometric evidence of the impact of FTAs on Turkey’s trade. When all FTAs are considered at macro level, the results suggest that, FTAs had a statistically significant positive effect on exports and imports of Turkey. However, at micro level, there is substantial variation and heterogeneity in the agreement specific effects and trade direction specific effects within the agreement. Conclusion-This paper provides the first evidence that the impact of FTAs are heterogenous and not all the FTAs affected the trade of Turkey in the same positive way. Even within the same agreement, the effects vary considerably depending on the direction of trade.

Is Trade in COVID-19 Products in ASEAN Economies a Building or Stumbling Block?

Stumbling blocks to regional integration continue to pose a serious threat to the World Trade Organization (WTO), particularly during the COVID-19 pandemic. This study aims to examine the effect of regional economic integration on trade in COVID-19 products for Association of Southeast Asian Nations (ASEAN) countries using quarterly data for 2010–2020. A panel data model is estimated using the Poisson pseudo-maximum likelihood approach to address zero trade values, cross-sectional dependence, and heterogeneity problems. The findings of a case study on bilateral trade in COVID-19 products reveal that the ASEAN regional trade agreement is a stumbling block to the WTO’s rules-based multilateral trading system. The results indicate that the home country’s productive capacity, the host country’s absorptive capacity, the countries’ similarity in size and per capita income, and the countries’ remoteness have positive and significant relationships with trade in COVID-19 products in ASEAN economies. This study provides several policy implications for Southeast Asian countries.

The impacts of the World Trade Organization on new members

AbstractIn recent years, there has been intense debate on the effects of the World Trade Organization (WTO) and its predecessor, the General Agreement on Tariffs and Trade (GATT) on global trade, triggered by Rose’s article (2004) suggesting that the WTO/GATT did not promote world trade at all. In addition, Subramanian and Wei (2007) pointed out a series of asymmetries in trade liberalization led by international organizations. In this paper, we estimate the WTO impact on new members considering both total and disaggregated trade flows from 1995 to 2014 using the gravitational model and Poisson Pseudo Maximum Likelihood (PPML) estimator. The sample includes bilateral imports from 133 countries in the primary, textile, and industrial sectors. This article provides strong evidence that the WTO has promoted new member trade, but weakly and unevenly between developed and developing countries and across sectors examined. Developed countries continued to benefit most from the increase in world trade promoted by the WTO, but more recent liberalization has also brought gains in exports to the group of the least developed countries (LDCs). Furthermore, the gains, although small, are concentrated in primary products.

The global visa cost divide: How and why the price for travel permits varies worldwide

Visas are an important means for countries to regulate the potential access of non-nationals to their territory. Past datasets and quantitative research on visas have focused on visa waivers, ignoring the fact that visas, where demanded, can vary greatly by cost. This paper presents a novel dataset based on a manual collection of visa costs for travel between a global set of country pairs in seven different categories (tourist, work, student, family reunification, business, transit, and other). Our analyses reveal a strong global visa cost divide that exposes the injustice in the right to travel for people located in different areas of the world. Whereas Europeans usually hardly have to work at all for travel permits, visa costs often amount to several weeks of mean income in Sub-Saharan Africa and South Asia. The result is a fundamentally paradoxical situation: The richer a country, the less its citizens pay for visas to go abroad (both in absolute terms and relative to their income). Poisson pseudo-maximum likelihood regression analyses reveal that a variety of factors influence the costs of visas between countries: reciprocal treatment, processing costs, historical-cultural ties, geographic proximity and regional, religious, economic, and political discrimination. This confirms the important role of visa costs as a tool for states to control population movements and simultaneously position themselves in international relations.

Institutional Quality and Trade Flow: Empirical Evidence from Malaysia and Other OIC Member Countries in Africa

This article examines the impact of institutional quality on bilateral trade flow between Malaysia and selected 25 African Organisation of Islamic Cooperation (OIC) member countries. Four institutional qualities were selected from World Governance Indicators with other trade predictors from the period from 1985 to 2016. Using gravity model of trade and Poisson pseudo-maximum likelihood estimation method (PPML) technique, the results confirm that government effectiveness, regulatory quality and political stability have an adverse effect on bilateral trade flow among the OIC countries in Africa. On the other hand, these institutional quality variables were considered as a strength for Malaysian economic growth. Therefore, better institutional quality reforms are needed among OIC member countries in Africa in order to accelerate trade, economic growth and development in their region.

Gravity assessment of the impact of alliances on bilateral trade: A comparative analysis of ECOMOG and NATO

AbstractThe prevailing notion for this research is anchored on determining the magnitude of alliances as trade determinants. Alliances are segregated into defence pact, non‐aggressive alliance and entente, which additionally integrates as trade cost in a gravity model. The Poisson pseudo maximum likelihood technique is adopted for the analysis with country pair‐effects exploited. Even though literature acknowledged three different kinds of alliance formation, the homogenous effects as trade cost have not been previously examined. Authors found that alliances' response to bilateral trade is homogenous irrespective of conceptualization and operationalism. All categories of alliance positively influence bilateral trade but could be more effective as trade determinant when rooted in a regional trade agreement. The result is more convincing in the NATO sample than the ECOWAS sample, which could not be unconnected with the level of economic and technological development in both cases. Militarized inter‐state conflict should be discouraged irrespective of the cause due to its negative effect on bilateral trade, especially in the region of its occurrence.

Impacts of Environmental Policies on Global Green Trade

The objective of this study was to investigate the impact of environmental policies on bilateral green exports among developed and developing countries. The empirical analysis was based on the fixed-effects gravity model estimation with the PPML (Poisson pseudo-maximum likelihood) for bilateral green trade of world countries for 1990–2019. This study focused on two proxy environmental policy indicators: environment-related tax and energy intensity. The major findings were that, first, promotion of environment-related tax increases green exports among HIC (high-income countries) and, second, an increase in the green trade of a country depends on the energy intensity level of its trading partner countries in order to stabilize domestic demand and production. This result is shown to be significant and consistent within the trade between the same income groups. Thus, supporting the green growth strategy, empirical results suggest that LMY (low- and middle-income) countries have to promote environmental policies and green production processes to be competitive in the global market.

Natural Resource Rents, Inequality, and Terrorism in Africa

ABSTRACT This study examines the impact of natural resource rents on terrorism via inequality channel in 34 African economies, straddling the period 1980–2012. This study employs a negative binomial regression, in which the following findings are established: first, the unconditional impact of natural resource rents on terrorism is found to be positive across the model specifications, particularly when Gini and Theil indices are controlled for. Second, inequality has no discernable first-order impact on terrorism across the board. Third, the marginal impacts of interactions between inequality measures, specifically Gini and Theil coefficients and total natural resource rents on terrorism are significantly negative. Four, the corresponding net effects of interactions between natural resource rents and inequality (Gini and Theil coefficients) on terrorism are positive, thus lending support to earlier submission of involving all constitutive variables in the specifications for the parameters to make economic sense. The results are robust to accounting for fixed and country effects using the Poisson Pseudo maximum likelihood high-dimension fixed effects estimator. On the policy front, maintaining fairness and equity in the distribution of rents from the ‘free gifts of nature’ remains a veritable policy menu, especially for the resource-rich economies, to counteracting terrorist activities.

Socio-economic determinants of global COVID-19 mortalities: policy lessons for current and future pandemics.

This paper examines the different socio-economic determinants of the fatalities associated with the COVID-19 pandemic globally in social determinants of health frameworks. It adapts the Poisson pseudo-maximum-likelihood (PPML) and the quantile regression techniques to effectively exploit the non-linear estimates of the data in order to derive non-biased point estimates at each quantile and make interquantile comparisons. This is particularly useful in recommending which societal variables become most significant at catastrophic levels of a pandemic like COVID-19 when existing health systems become overwhelmed. These estimators are applied to panel data for 196 countries over days of infection from the first recorded case. The COVID-19-related data is from Our World in Data, and the socio-economic variables are from the World Bank’s World Development Indicators. The results establish that an improved adequate health infrastructure for both testing and treatment is necessary, but not sufficient. Health systems ultimately become overwhelmed and ineffective in managing cases and reducing mortality in the face of the rising pandemic. Complementary social, economic, physical and environmental factors are necessary for curbing deaths. These factors relate to improving the health stock of the population through reductions in both communicable and non-communicable comorbidities; enhancing sanitation and hygiene; and improving the nutrition of the population. Socio-economic and environmental measures are the reduction of household and ambient air pollution; reduction of exposure to alcohol and cigarettes; reduction of poverty and ensuring economic inclusion; and learning from the past to fine-tune governments’ control measures in order to minimize harm to the population while effectively curbing mortality.

Determinants of CO2 emissions generated by air travel vary across reasons for the trip

This study estimates factors of importance for the carbon dioxide equivalent (CO2e) emissions generated by travellers flying for different reasons based on representative Austrian micro data for the period 2014–2016. The annual average number of flights taken by adults vary between 0.1 (visiting friends) and 0.8 (going on holiday), and the amount of CO2e emissions generated by each return flight is approximately 1100 kg. This leads to a total of 6 million tonnes CO2e emissions per year. Results of the Pseudo Poisson Maximum Likelihood estimations reveal that the amount of CO2e emissions created is related to socio-demographic, locational and seasonal factors, although mainly for the largest group of travellers: the holiday makers. In this group, individuals with university degrees, young persons (16–24 years) and capital city residents generate the largest amounts of emissions, as opposed to persons with children and large households. Residents of the capital region each quarter cause 64 kg more CO2e emissions than inhabitants of rural areas, persons with university degrees create 74 kg larger emissions than those without degrees and young adults instigate 90 kg more emissions than middle-aged persons. CO2e emissions of holiday flights are highest in the first quarter of the year. The importance of education is also pronounced for CO2e emissions related to business travel, as is gender.