Simultaneous Equation Model Research Articles

Ask more, awarded more: Evidence from Taiwan’s courts

Whether a plaintiff is awarded more simply because she has asked for more is a fascinating question. The existing studies are predominantly experimental, as the “control group” in the experiments hardly exists in reality. Using Taiwan’s transaction data on land sales and leases to control for case differences, and matching them with adjudications in the court data, we show that the plaintiff’s claim, even if not based on market evidence, increases the judge’s award. Simultaneous equations model allows us to control for the unobsevables that affect both claims and awards. We also show that the release of public information weakens this effect.

The effect of corporate governance, corporate social responsibility and information asymmetry on the value of Indonesian-listed firms

Purpose This study aims to examine the influence of corporate governance (CG) and corporate social responsibility (CSR) on firm value while accounting for the impact of information asymmetry. Design/methodology/approach This empirical analysis is based on 1,079 observations from 83 listed Indonesian firms for the period 2007–2019. The authors applied simultaneous equation models with ordinary least squares and two-stage least squares. Findings The authors present empirical evidence of CG mechanisms that significantly contribute to low levels of CSR. Moreover, the authors identify a significant impact of information asymmetry on the relationship between CG, CSR and firm value. Research limitations/implications The results show that information asymmetry, CG and CSR do not necessarily result in improved firm value across boards. Moreover, the employment of a nonlinear Cobb–Douglas-type function indicated diminishing marginal returns. Practical implications The findings can help policymakers in developing countries in improving the monitoring and supervisory roles of CG mechanisms to provide more support to CSR, increasing regulatory pressures for improved CSR performance and reducing information asymmetry by adopting a standardized CSR reporting scheme. Social implications The suggested implications can contribute to more sustainable practices among Indonesian-listed firms as well as improving relationships with consumers and stakeholders toward the practice of CSR. Originality/value The adoption of a comprehensive CSR measurement tool to examine the value of CSR contributes to the extant literature, along with examining the impact of information asymmetry on the relationship between CG, CSR and firm value in a developing country context.

Current Account Imbalances, House Prices, and Institutions

Current account imbalances and housing price boom-bust cycles have become the defining characteristics of the pre-global financial crisis period. In the same period, it is observed that even though the developments of the economies show similar trends in many countries (e.g. an increase in credit supply, a decrease in interest rates), they have distinct characteristics (e.g. the volatility of house prices, and level of current account imbalances). Additionally, their final impacts on the economy vary to a significant degree from country to country. The institutional features of the markets (e.g. accessibility of credit information, protection of investors) have the potential to contribute to this differentiation. However, there are no studies on the effect of institutional features on the relationship between house prices and current account imbalances. The aim of this study is to examine the relationship between house prices and current account imbalances as well as the role of institutions in this relationship for 14 EU countries. To do so, a simultaneous equations model is used. The results of the empirical analysis show that in the 2007-2008 global financial crisis, there is a positive and significant relationship between house prices and current account imbalances, and institutional features have a potential role in the strength of this relationship.

Human Capital and Innovation Nexus in India: Evidence from Simultaneous Equation Modelling

"Using a simultaneous equation model, the present study attempts to empirically, investigate the interrelationship between human capital and innovation in Indian context. The study is conducted by taking all the 36 Indian states and Union territories into consideration from a regional perspective, focusing mainly on the quantification of the factors used. Since the simultaneous equation model is often subject to the problem of simultaneous bias and endogeneity, instrumental variable method using Two Stage Least Squares (2SLS) has been utilised to overcome the issue. In fact, the 2SLS provides the evidence of bidirectional spatial causality between human capital and innovation for Indian states, which holds significant policy implications for the country. Given a large demographic dividend in the form of highest working age population in the world, India could reap its benefits by promoting investments in the soft infrastructure such as health, education, and labour skills. This could help to boost its economic growth in the long run."

Econometric Insights into South Asia's Monetary, Output, and Price Dynamics: A Simultaneous Equation Modeling Approach

This study focuses on investigating the simultaneous relationship among money supply, inflation, and output of emerging South Asian countries. Data from seven countries in the South Asian region, spanning from 2000 to 2022, is collected for the analysis. Three variables are considered endogenous: Money Supply, Output, and Inflation. Following the fulfillment of assumptions, we employed the Panel Two-Stage Least Squares (Panel 2SLS) method to examine the relationship between money, output, and prices. The results indicated a significant bidirectional relationship between output and money supply, meaning that a higher money supply is associated with increased output and vice versa. Additionally, a unidirectional empirical relationship is observed between inflation and money supply. As the money supply does impact the output, so neutrality of money does not hold. The study recommends South Asian countries establish a policy framework that cautiously adjusts the money supply, balancing the need to prevent excessive inflation or deflation to maintain sufficient liquidity to support optimal economic output.

Retracted: Innovation and Entrepreneurship Coupling Based on Simultaneous Equation Model and Its Energy Economic Effect Measurement

Retracted: Innovation and Entrepreneurship Coupling Based on Simultaneous Equation Model and Its Energy Economic Effect Measurement

ESG, Taxes, and Profitability of Insurers

The growing concerns about sustainability urge insurance companies to implement Environmental, Social, and Governance (ESG) policies in order to remain competitive. All the three dimensions of corporate sustainability involve taxation; therefore, it is important to establish if this association reflects on financial performance. Our analysis of worldwide property and casualty (P&C) insurers during 2013–2022 reveals that high ESG insurers pay more taxes, while they are less profitable compared to low ESG insurers. This pattern is confirmed using instrumental variable regressions and simultaneous equations systems. We argue that sustainable insurers are less tempted to avoid taxes and do not shift their tax burdens onto policyholders and investors. However, the interplay between taxes and sustainability seems to harm insurers’ profitability, potentially having negative effects on investment and economic growth. This is an important insight for tax authorities and insurance managers.

A study of heterogeneous traffic noise trigger parameters for urban areas

So far, the review of the parameters that trigger traffic noise in urban areas has been partially based on only one factor, namely traffic flow. Meanwhile, other factors have not been included as variables that trigger traffic noise and the analysis has not been conducted simultaneously. In this research, the noise level was measured using a Sound Level Meter (SLM) and analyzed using a mathematical equation. The method for determining the parameters that trigger noise was analyzed through a simultaneous equation system using SmartPLS. The results of the study show that in big cities with heterogeneous traffic, the traffic composition is more dominated by motorcycles at 64%, followed by light vehicles at 32%, and heavy vehicles at 4% with an average vehicle speed of 36 km/h. The low speed is not due to traffic congestion but is mainly caused by driver behavior of not accelerating their vehicles. The parameters that can be used as indicators of heterogeneous traffic noise triggers in urban areas are traffic aspects with indicators of motorcycle volume and traffic density, road physical aspects with superelevation indicator, as well as environmental aspects of the road with the air temperature indicator.

Province Regional Tax Revenue Increase Model

This study aims to formulate a model of increasing local taxes in Jambi province. The model used in this study is the simultaneous equation model. The results showed that there was a positive and significant influence on regional investment, population, and economic growth, number of commercial business units, taxpayers and natural resources on local tax revenues. Meanwhile, tax resources have no significant effect on local tax revenues. Especially for regional investment, it is also significantly influenced by special allocation funds, while infrastructure does not have a significant effect on regional investment.

The Impact of External Debt on Human Capital Development and GDP Growth in HIPCs: a Comprehensive Approach

The growth theorists argue that human capital development/accumulation (HCD/A) is vital for economic growth. However, the level of external debt accumulation determines HCA and its effect on economic growth. Besides, the impact of external debt on growth is still debatable. Further, the external debt-growth relationship could be non-linear instead of linear, and external debt can affect growth through the HCD channel. Therefore, this study aims to look at the impact of foreign debt on HCD and growth in heavily indebted poor countries (HIPCs) employing seemingly unrelated regressions (SUR) and other alternative simultaneous equations models (SEMs) from 1990–2017. The result indicates the link between foreign debt and HCD is negative and non-linear, but only non-linearity is observed between foreign debt and growth. Besides, external debt affects HIPCs growth through the HCD channel. Therefore, the study recommends essentializing solid macroeconomic policies, strengthening institutional performance, appropriate debt management strategies, and investing borrowed funds in productive projects.

Analysis of the Simultaneous Problems of Poverty and Gross Domestic Product (GDP) as Macroeconomic Factors in a Developing Country

When analysing macroeconomic factors using an econometric approach that attempts to determine the successful economic development of countries, such as in the analysis of poverty and gross domestic product (GDP), problems have been repeatedly encountered in considering the variables involved simultaneously. To overcome this problem, it is necessary to use the two-stage least squares (2SLS) method as the best estimator by applying the simultaneous equation model. The objective of this study is to analyse the simultaneous equation model between poverty and GDP in a developing country such as Indonesia. The macroeconomic data sources used for this study are secondary time series data from 1990 to 2017 obtained from Indonesia Statistics Agency, IMF, UNDP and World Bank. The result shows that there is strong evidence that poverty and GDP act simultaneously or endogenously in the model. From the results, it is recommended that in order to achieve higher GDP in the future, the Indonesian government should pay more attention to alleviating poverty rates, reducing unemployment rates, lowering merchandise imports, and improving economic growth in addressing macroeconomic problems in the country.

The relationship between inventory leanness and product innovation with the contingent role of market concentration

PurposeThis study aims to demonstrate the simultaneous effects between inventory leanness and product innovation, with market concentration being a moderator.Design/methodology/approachUsing a large panel data collected from 3071 listed manufacturing enterprises from 2004 to 2021, this research employs a simultaneous system of equations via the three-stage least square method to explore the simultaneous relationship between inventory leanness and product innovation. In addition, the moderating role of market concentration is demonstrated via one four-model system.FindingsAs its core, inventory leanness positively impacts product innovation, while product innovation negatively affects inventory leanness. Moreover, there are differential impacts of the leanness of three inventory types on product innovation. Specifically, the inventory leanness of raw material negatively affects product innovation, while the inventory leanness of work-in-process and finished goods positively affect product innovation. Further, moderation analysis highlights that market concentration is a key moderator of this relationship.Practical implicationsManagers should carefully gauge the tradeoffs between inventory leanness and product innovation. Concretely, managers ought to consider the connections between inventory types and product innovation. In addition, managers are suggested to emphasis on market strategy.Originality/valueThis paper not only contributes to the current understanding of inventory leanness by verifying the impact of inventory leanness on product innovation but also investigates the simultaneous relationship between various inventory types and product innovation. Furthermore, it empirically demonstrates the moderating effect of market concentration on the relationship between inventory leanness and product innovation.

New Bayesian Approach to the Estimation in Simultaneous Equations Model

New Bayesian Approach to the Estimation in Simultaneous Equations Model

Incidence of financial system credit in the private sector and real PBI, 2003-2023: An empirical approach using a simultaneous equations model

Incidence of financial system credit in the private sector and real PBI, 2003-2023: An empirical approach using a simultaneous equations model

Household consumption and indebtedness: Are there disparities between genders, rural–urban areas, and among income groups?

Recently, household debt has been steadily increasing across the globe. Household consumption is an essential factor in household debt, along with households' characteristics, such as their location, the gender of the household head, and their income group. Therefore, this research investigates the disparities in the impacts of households' characteristics on their indebtedness and consumption. The study utilizes the Household Expenditure and Income Survey conducted in 2019 by the Department of Statistics of Malaysia, which included a simple random sample of 4,730 households. A simultaneous equations model is the employed method of analysis, and the results reveal that the gender of the household head, residential areas, and income groups have differential effects on household consumption and indebtedness through predetermined variables. Specifically, results show that indebtedness has a negative effect on household consumption for the middle-income group (M40); savings are negatively associated with consumption for households living in rural areas and the M40 group. Furthermore, income is positively associated with consumption for rural households and when the household head is female. Finally, household size also has a positive effect on consumption.

An Examination of the Relationship Between Agricultural Value Added and Agricultural Supports with Panel Simultaneous Equation Systems

Agricultural support is a crucial way to overcome the difficulties of long agricultural production process, lack of capital and low productivity. Moreover, the fact that increasing the supply is not possible in a short while makes agricultural support more important. Different agricultural structures of countries imply different agricultural support values. This paper examines the simultaneous relations between agricultural support and agricultural value added in the six developing countries with the highest agricultural production value. Simultaneous equation systems are estimated by Two-Stage Least Squares method using annual data for the 2002-2018 period. The findings suggest that there is a simultaneous positive and statistically significant relationship between agricultural value added and agricultural supports.

Exploring the nexus of green finance and renewable energy consumption: unraveling synergistic effects and spatial spillovers.

As China transitions towards a green and low-carbon energy system, it is crucial to have the support of green finance. In this study, we explore the effects of synergy and spatial spillovers in the development of green finance and the consumption of renewable energy. By taking a synergistic perspective, we aim to provide new insights for energy structure reform.We use a spatial simultaneous equations model in combination with a three-stage generalized spatial least squares approach, our findings are the following: firstly, there is a positive synergy between the development of green finance and the consumption of renewable energy. Secondly, there are positive spatial spillovers in the development of green finance and the consumption of renewable energy, but the regional interaction effects of green finance development on renewable energy consumption are negative. Furthermore, we observe that the impact of renewable energy consumption on green finance development has been increasing since 2013. However, the reverse relationship is not true, indicating that the renewable energy industry has stabilized and is gaining appeal in financial markets. Our study highlights that the development of green finance can promote an increase in renewable energy consumption through the facilitation of economic growth, green technology innovation, and the upgrading of the industrial structure. We emphasize the importance of regional and industrial coordination to create synergy between green finance development and renewable energy consumption.

Exploring the Interactive Relationship between Retailers’ Free Shipping Decisions and Manufacturers’ Product Sales in Digital Retailing

In the realm of multichannel digital retailing, free shipping has gained popularity as a promotion strategy. However, few studies have investigated how retailers make decisions regarding free shipping. Furthermore, concerns have arisen regarding the sustainability of free shipping promotions for manufacturers. This research employs a simultaneous equation model with fixed effects to explore the determinants of market structure concerning the proportion of retailers offering free shipping and its impact on manufacturers’ product sales. As per our current knowledge, this research is pioneering in establishing a causal relationship between the percentage of free-shipping retailers and manufacturers’ product sales. Specifically, an increase in the percentage of retailers employing free shipping leads to higher product sales, while lower product sales drive increased retailers to adopt free shipping. Our findings indicate that competition among products has a significant positive effect on the percentage of retailers offering free shipping in the interactive relationship. Furthermore, increased competition among retailers results in more retailers adopting free shipping strategies. These results affirm the efficacy of free shipping as a promotional approach to increase manufacturers’ product sales, particularly in highly competitive markets.

Systematic and dynamic impacts of the COVID-19 pandemic on marine economic development, air pollution and energy consumption: A case study of China's coastal regions

The COVID-19 pandemic has caused a huge impact on marine economic development, air pollution and energy consumption. However, there is a lack of systematic and quantitative assessment of the impact of the pandemic on the impact on marine economic development, air pollution and energy consumption under a unified framework. To fill this knowledge gap, we used panel data of 11 coastal provinces (municipalities directly under the central government or autonomous regions) in China over the period of 2016–2021. We used the Panel Simultaneous Equation Model (PSEM) to study the systematic impact, and adopt the Panel Vector Autoregression Model (PVAR) to describe the dynamic impact. The results show that the COVID-19 pandemic has a negative impact on marine economic development and energy consumption, but a positive impact on air pollution. The impact on the marine economy and air pollution follows a trend of increasing, then decreasing, and eventually stabilizing, while the impact on the energy consumption shows a trend of initially decreasing, then increasing, and eventually stabilizing. The study provides valuable policy recommendations for the countries around the world to mitigate the negative effects of the COVID-19 pandemic, promote marine economic development, control air pollution and stabilize energy consumption.

Revisiting the puzzle of endogenous nuclear proliferation

Nuclear proliferation literature typically differentiates supply-side and demand-side factors influencing the spread of nuclear weapons. These distinct approaches to the proliferation puzzle raise the following empirical questions: Does nuclear supply stimulate states’ demand for nuclear weapons? Conversely, does the demand for nuclear weapons really facilitate the acquisition of nuclear supply? If such endogeneity exists between the demand-side and supply-side determinants, how would it cause empirical bias in the estimation of their effects on nuclear proliferation? This article aims to unpack endogenous mechanisms of nuclear demand and nuclear supply over the course of nuclear proliferation. In particular, it examines two potential sources of endogeneity: (1) simultaneous interactions between states’ nuclear development decisions and nuclear technological capability and (2) selection bias in nuclear development. To address each source of endogeneity, simultaneous equation models and the duration models with selection are estimated, respectively. Contrary to what recent supply-side literature suggests, the empirical analyses reveal that states’ nuclear demand is primarily driven by external security threats instead of their existing nuclear technology, and that their successful acquisition of nuclear technology mainly follows as the result of nuclear development efforts but does not necessarily depend on individual supply-side factors. This article addresses the typical inference issues in nuclear proliferation research and contributes to our synthetic understanding of proliferation mechanisms.