Time-invariant Unobserved Heterogeneity Research Articles

Insecure maternal employment and children's behaviour difficulties: Evidence from the longitudinal study of Australian children

Although a large body of research has documented the negative effects of insecure employment for adult workers, less is known about the consequences for their children's well-being. Our understanding of the mechanisms through which insecure maternal employment may affect children is particularly limited. This study examines the relationship between insecure maternal employment and child behaviour difficulties from the age of 4–16 using seven waves of data for nearly 5000 families from Growing Up in Australia: The Longitudinal Study of Australian Children. Employing fixed effects models to account for unobserved time-invariant heterogeneity, we found that children whose mothers were casual contract employees or economically inactive had greater behaviour difficulties, on average, than their peers whose mothers were permanent employees. Maternal mental health and parenting, rather than household financial strain, contributed to explaining the association between insecure maternal employment and child behaviour difficulties. These results were more pronounced for younger children (up to the age of 12). This study contributes to the literature on the consequences of maternal employment insecurity for child mental health in high-income countries by clarifying the mechanisms behind this association.

Household energy price resilience in the face of gas and electricity market crises

Despite the provision of financial support by the Government in response to the recent energy crisis, the resilience of households to the ensuing high energy prices remains to be established. In this study we propose a new definition of resilience, specifically ‘energy price resilience’, and put forward an empirical approach to capture low energy price resilience (LENRES). We also assess its associated socio-economic and demographic factors using a representative UK panel. Using models that account for time-invariant unobserved heterogeneity, we further explore the association between LENRES and a rich set of health, disability, and wellbeing outcomes for adults and children through two fundamental routes: (1) the low energy and thermal affordability channel (LEA); and (2) the low energy and financial solvency channel (LES). We find that employment status, housing tenure, inability to save, energy prepayment methods, and household composition are systematic socio-economic correlates of LENRES. Moreover, LENRES is associated with worse health, disability, and wellbeing outcomes for adults; these associations are primarily driven by the LES component. On the other hand, in the case of children, LENRES at home is only systematically associated with life satisfaction, rather than general health. Our results suggest that targeted energy interventions could generate wider societal benefits.

Firm Size and Productivity in the Informal Sector: Evidence from India

The study analyses the debate around the ambiguous relationship between firm size and performance. We explore how productivity varies across firm sizes in the informal sector, where firm size is sensitive to formal regulations. Additionally, the study also looks into the informal firms’ quantity and quality of employment by observing wage and performance dispersion across firm sizes, thus indicating capital accumulation and exploitation. Considering the data limitations, a pseudo-panel data design was adopted by combining the three, only available, independent cross-sectional surveys by the National Sample Survey Office, spanning from 1999–2000 to 2015–2016. Potential issues such as time-invariant unobserved firm-level heterogeneity were accounted for by using panel random effects regression. Using total firm employment and total factor productivity as the primary measures of firm size and performance, we find a positive relationship between the two across all major industries. Our results stand robust against alternative firm size and performance measures. However, this positive association between size and performance indicated capital accumulation (increasing productivity with increasing size) at the expense of labour exploitation (stagnant wages across firm sizes). The obtained findings convey important policy implications for adopting a carrot-and-stick approach for the gradual formalisation of the economy. JEL Codes: D22, L25, O25

Weather, Lockdown, and the Pandemic: Evidence from the Philippines

As the landscape of the COVID-19 pandemic continues to evolve, there is a need to better understand the factors that affected COVID-19 health outcomes using a more appropriate dataset and comprehensive variables. This paper constructs a novel daily provincial panel dataset (N = 14,507) during the nascent and important period of the pandemic (April–September 2020) to analyze both the socioeconomic (lockdowns or ECQ, mobility of individuals, health care capacity, and trends in transmission) and environmental factors (rainfall shocks, temperature in Celsius, average relative humidity, and wind speed) that affect COVID-19 health outcomes. A panel dataset is more apt than the other types of datasets since it addresses both spatial and time variations, as well as the time-invariant unobserved heterogeneity that, if ignored, would have resulted in biased estimates and findings. In addition, using a more complete list of explanatory variables could address omitted variable bias, which leads to proper identification and a more reliable set of findings that could aid the government in formulating optimal, multi-faceted, and timely policies for future health crises. Using fixed effects on panel data, our results, which are robust across the different lag structures and time periods used, are consistent with the existing literature with caveats. First, while ECQ is effective in stemming COVID-19 cases, it is ineffective in reducing COVID-19 deaths. Second, exogenous weather variables have heterogenous effects on COVID-19 health outcomes contingent on the period of analysis and the type of health outcome analyzed. Third, public behavior, which is only partially correlated with public policy (ECQ), matters in curtailing viral transmission. We conjecture that individuals voluntarily avoid infection for their own well-being, resulting in positive externalities, or they stay at home due to weather shocks.

Orphanhood and Child Development: Evidence From India.

This article provides the first systematic study of the short- and long-run effects of parental death on the cognitive, noncognitive (locus of control), and physical development of Indian children. Exploiting rich longitudinal data over 15 years, I use difference-in-differences with individual fixed effects to account for time-invariant unobserved heterogeneity between orphans and non-orphans and investigate the mechanisms. This method is an improvement over previous cross-sectional approaches to such explorations. I find that paternal death is negatively correlated with orphans' cognition but is not correlated with locus of control or physical health. Cognitive effects are mediated by a 10-percentage-point-lower probability of enrollment and a 20% decline in monetary investments in the child, eventually leading to one less year of schooling by age 22. These negative outcomes are concentrated among the least wealthy families, who respond to the shock by reducing consumption and increasing their labor supply.

Getting back to the state: policing the Covid-19 pandemic

ABSTRACT This paper analyzes the impact of the pandemic (from 2020 to 2021) on levels of trust and legitimacy of the Chilean police (Carabineros) by the population in the metropolitan area of Santiago, Chile. Based on a pseudo-panel method and a cohort fixed-effects regression model that controlled for unobserved time invariant heterogeneity, we found a significant increase in police legitimacy during the pandemic (on average, 63%, among the adult residents of the region, based on the police legitimacy index comprising six perceptual variables). Evidence suggests that the perceived performance of the Carabineros during the pandemic served to recover the trust of citizens, at least temporarily, even when this intervention entailed the enforcement of anti-popular measures.

Corporate governance, financial transparency and currency devaluation shocks: evidence from Egypt

Purpose This study aims to investigate the association between corporate governance and financial transparency, using the moderating role of an Egyptian currency devaluation decision as a policy shock. Design/methodology/approach Data was collected for a sample of companies listed on the Egyptian stock exchange from 2014 to 2019. To control for time-invariant unobserved heterogeneity, the authors analyse panel data using an estimated generalised least squares regression model. Findings The findings underline the pitfalls of assuming that corporate governance mechanisms are effective regardless of circumstances and support the complementary roles of a number of theories in interpreting the empirical findings. Research limitations/implications This study is limited to non-financial companies and includes only corporate board and audit committee governance mechanisms. The study results have important implications for policymakers, international lending institutions, investors and accounting standards setters. It is of particular importance to policymakers in other less-developed countries with similar economic conditions. Originality/value To the best of the authors’ knowledge, this study is the first empirical attempt to provide evidence of the impact of a currency devaluation shock on the relationship between corporate governance and financial transparency within the Egyptian context as an example of a transitional economy. Hence, it provides a significant theoretical and empirical contribution to the literature.

Conflict and farm inputs investment : can social safety nets have any mitigation effect?

ABSTRACT This paper examines the impact of armed conflict on the tendency and value of investments in farm inputs. We further investigate whether unconditional cash transfers could stimulate investments in inputs under the context of armed conflict. Using panel data collected in 2014 and 2016 in Mali, we combine the control function approach with the correlated random effect model to address the time-invariant unobserved heterogeneity in non-linear context and the endogeneity problem of conflict variable. We take advantage of the randomized rollout of a national cash transfer program to investigate if there is any differential impact on farm inputs. We find that conflict has a negative and statistically significant impact on the tendency to use and the value of investments on fertilizers, pesticides and machinery. Interestingly, we find a statistically insignificant impact of the cash transfers on farm input investments. From a policy perspective, productive capacities of households cannot be restored by the cash transfers. Rather, a recovery of markets’ operations through the re-establishment of security is a more effective policy measure to increase investments in farm inputs.

Evidence on birth spacing and child cognition from Indonesia

ABSTRACT Research from the medical and social science literature has found that spacing births closely together leads to adverse health and socioeconomic outcomes for the younger child. More recent evidence using inter-family comparisons is challenging the validity of those results. However, while inter-family comparisons allow for time-invariant unobservable heterogeneity across families, they cannot fully control for changes in families that occur over time and may affect both decisions about birth intervals as well as child outcomes. To our knowledge, this paper provides the first examination of the effects of birth spacing on later childhood cognitive outcomes that accounts for both time-invariant and time-varying heterogeneity in the same models. Instrumental variables estimations on data from Indonesia indicate that younger siblings perform significantly better on maths assessment exams when they are spaced farther apart from their immediately older sibling. This effect appears to be concentrated among the poorest and least educated households. The data thus suggest that close spacing may be detrimental to the socioeconomic outcomes of the younger sibling.

Women on boards, firm earnings management (EM) and performance nexus: does gender diversity moderate the EM–performance relationship?

PurposeThis paper aims to shed light on an essential role that “female directors” on boards of companies in sub-Saharan Africa play towards corporate financial performance enhancement. The study observes how board gender diversity moderates the relationship between earnings management (EM) and financial performance of firms in sub-Saharan Africa from a dynamic perspective.Design/methodology/approachThe study’s sample comprises 105 companies listed on the respective stock markets of nine sub-Saharan African countries. The data are collected from annual reports over the period 2007–2019, a total of 1,166 firm-year observations. Panel data models are used in the analyses.FindingsThe study finds that the performance effect of EM is contingent on board diversity and this finding persists even after controlling for dynamic endogeneity, simultaneity and unobserved time-invariant heterogeneity inherent in the EM and performance relationship.Research limitations/implicationsThe findings should be understood within the context that, only available annual reports and audited financial statements that were filed with respective capital markets of the nine surveyed countries are used as source of information.Originality/valueThe current study is unique, in that, it is the first panel multi-cross-country investigation within Africa to introduce gender diversity in the study of the relationship between EM and firm performance. It therefore extends the agency theory by using gender diversity as a moderating variable in the EM–firm performance nexus.

How Does Female Entrepreneurship Affect Happiness?

Abstract The purpose of this paper is to investigate the correlation between female entrepreneurship and happiness within the Association of Southeast Asian Nations (ASEAN) region. The study uses a panel data model with two independent variables measuring female entrepreneurship and five control variables measuring the determinants of happiness. The method used for analysis is the panel fixed effects of the method of moments quantile regression (MM-QR) to examine data from nine ASEAN countries between 2006 and 2021. MM-QR can capture the location and scale of the conditional distribution of the dependent variable, making it suitable for studying the heterogeneous effects of female entrepreneurship on happiness across happiness quantiles. This approach controls for unobserved time-invariant heterogeneity, reducing omitted variable bias in cross-sectional studies. The MM-QR approach is rigorous and robust for analysing the complex relationship between female entrepreneurship and happiness in ASEAN countries. The main contribution of this study is to shed light on the relationship between female entrepreneurship and happiness, which reinforces and supports comprehensive development in emerging countries. The findings suggest that policymakers and practitioners can benefit from supporting female entrepreneurship by implementing policies and programs that provide access to education, training, mentorship, and financing. Furthermore, the study highlights the importance of the gender development index (GDI) as a determinant of happiness in ASEAN countries.

Equivalent approaches to dealing with unobserved heterogeneity in cross-lagged panel models? Investigating the benefits and drawbacks of the latent curve model with structured residuals and the random intercept cross-lagged panel model.

Panel models in structural equation modeling that combine static and dynamic components make it possible to investigate reciprocal relations while controlling for time-invariant unobserved heterogeneity. Recently, the latent curve model with structured residuals and the random-intercept cross-lagged panel model were suggested as "residual-level" versions of the more traditional autoregressive latent trajectory and dynamic panel models, respectively. Their main benefit is that they allow for a more straightforward interpretation of the trajectory factors. It is not widely known, however, that the residual-level models place potentially strong assumptions on the initial conditions-that is, the process that was occurring before the observation period began. If the process under investigation is not both stationary and at equilibrium then the residual-level models are not appropriate. They then do not control for all time-invariant unobserved heterogeneity and can result in biased cross-lagged and autoregressive estimates. I demonstrate this using the problem behavior of cigarette smoking among adolescents: Because the mean and variance of this process changes as a young person's smoking behavior develops, early stages of this process should not be examined using the residual-level models. This issue potentially exists for a wide variety of psychological and sociological subjects, essentially whenever the process under investigation is changing over the course of the observation period. This article discusses strategies to help researchers decide which model to use when, and compares some of their relative advantages and drawbacks. An amendment to the residual-level models is suggested in which the latent individual effects are allowed to covary with the initial residuals. This makes the residual-level models robust to violations of the assumptions surrounding the initial conditions, while retaining their other beneficial aspects. (PsycInfo Database Record (c) 2022 APA, all rights reserved).

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This study examines the determinants of housing tenure choice decisions of Millennials.
 Using KLIPS panel data from 2014 to 2020, a correlated random effects probit model and a fixed effects logit model were estimated to control for endogeneity problem associated with time-invariant unobserved heterogeneity. Estimation results showed that net wealth, relative housing cost, marital status of household heads were major determinants of housing tenure choice decisions. Permanent income, one of key variables on the housing tenure choice, was not significant, indicating that net wealth rather than income is more important to homeownership decisions of Millennials. However, the effect of net wealth on the probability of home owning was estimated to decrease over the observation period because the increase in net wealth could not catch up with the rise of housing price. A sharp decrease of the effect of net wealth on the probability of home owning in recent years was attributable to a dramatic increase in housing price and more stringent mortgage regulations.

Estimating technical efficiency in the presence of farm heterogeneity: evidence from maize production in Ethiopia

PurposeThe purpose of this paper is to measure technical efficiency and examine its determinants while disentangling unobserved time-invariant heterogeneity from actual inefficiency using comprehensive household-level panel data.Design/methodology/approachThis paper estimates technical efficiency based on the true random-effects stochastic production frontier estimator with a Mundlak adjustment. By utilising comprehensive panel data with 4,694 observations from 39 districts of four major maize-producing regions in Ethiopia, the author measures technical efficiency and examine its determinants while disentangling unobserved time-invariant heterogeneity from technical inefficiency. By using competing stochastic production frontier estimators, the author provides insights into the influence of farm heterogeneity on measuring farm efficiency and the subsequent impact on the ranking of farmers based on their efficiency scores.FindingsThe study results indicate that ignoring unobservable farmer heterogeneity leads to a downwards bias of technical efficiency estimates with a consequent effect on the ranking of farmers based on their efficiency scores. The mean technical efficiency score implied that about a 34% increase in maize productivity can be achieved with the current input use and technology in Ethiopia. The key determinants of the technical inefficiency of maize farmers are the age, gender and formal education level of the household head, household size, income, livestock ownership, and participation in off-farm activities.Research limitations/implicationsWhile the findings of this study are critical for informing policy on improving agricultural production and productivity, a few important things are worth considering in terms of the generalisability of the findings. First, the study relied on secondary data, so only a snapshot of environmental factors was accounted for in the empirical estimations. Second, there could be other sources of unmeasured potential sources of heterogeneity caused by persistent technical inefficiency and endogeneity of inputs. Third, the study is limited to one country. Therefore, future research should extend the analysis to ensure the generalisability of the empirical findings regarding the extent to which unmeasured potential sources of heterogeneity caused by persistent technical inefficiency, endogeneity of inputs and other unobservable country-specific features – such as geographical differences.Originality/valueThis paper contributes to the literature on agricultural productivity and efficiency by providing new evidence on the influence of unobservable heterogeneity in a farm efficiency analysis. While agricultural production is characterised by heterogeneous production conditions, the influence of unobservable farm heterogeneity has generally been ignored in technical efficiency estimations, particularly in the context of smallholder farming. The value of this paper comes from disentailing producer-specific random heterogeneity from the actual inefficiency.

The economic impact of universities: empirical evidence from Turkish provinces

ABSTRACT Twenty-three new state universities were established in different provinces in Turkey in 1992. This study investigates universities’ possible economic impacts on local economies in provinces in Turkey by comparing per capita GDP before and after the establishment of new universities. To do so, we employ difference-in-difference and matching based on entropy balancing to provide robustness against observable and time-invariant unobservable heterogeneity. Using the provincial level data between 1987 and 2000 in Turkey, we find that increases in the number of universities are positively associated with GDP per capita at the province level. Empirical results also show that unemployment rates in provinces fall with the establishment of new universities in Turkey.

Contribution of the Technical Efficiency of Public Health Programs to National Trends and Regional Disparities in Unintentional Childhood Injury in Japan.

To achieve the Sustainable Development Goals, strengthening investments in health service inputs has been widely emphasized, but less attention has been paid to tackling variation in the technical efficiency of services. In this study, we estimated the technical efficiency of local public health programs for the prevention of unintentional childhood injury and explored its contribution to national trend changes and regional health disparities in Japan. Efficiency scores were estimated based on the Cobb–Douglas and translog production functions using a true fixed effects model in a stochastic frontier analysis to account for unobserved time-invariant heterogeneity across prefectures. Using public data sources, we compiled panel data from 2001 to 2017 for all 47 prefectures in Japan. We treated disability-adjusted life years (DALYs) as the output, coverage rates of public health programs as inputs, and caregivers' capacity and environmental factors as constraints. To investigate the contribution of efficiency to trend changes and disparities in output, we calculated the predicted DALYs with several measures of inefficiency scores (2001 average, yearly average, and prefecture-year-specific estimates). In the translog model, mean efficiency increased from 0.62 in 2001 to 0.85 in 2017. The efficiency gaps among prefectures narrowed until 2007 and then remained constant until 2017. Holding inefficiency score constant, inputs and constraints contributed to improvements in average DALYs and widened regional gaps. Improved efficiency over the years further contributed to improvements in average DALYs. Efficiency improvement in low-output regions and stagnated improvement in high-output regions offset the trend of widening regional health disparities. Similar results were obtained with the Cobb–Douglas model. Our results demonstrated that assessing the inputs, constraints, output, and technical efficiency of public health programs could provide policy leverage relevant to region-specific conditions and performance to achieve health promotion and equity.

The effect of earnings management on firm performance: The moderating role of corporate governance quality

This paper investigates the relationship between earnings management and financial performance of firms in Anglophone sub-Saharan African Countries in a dynamic framework. The study shows how this relationship is moderated by aggregate disclosure and best-practice corporate governance quality metrics. The findings indicate that earnings management's performance effects persist even after controlling for dynamic endogeneity, simultaneity, and unobserved time-invariant heterogeneity inherent in the earnings management and performance relationship. Again, the results support the prediction of agency theory regarding the efficient monitoring effect of adherence to best-practice internal governance systems in constraining firms' earnings management practices and subsequently enhancing firms' performance. Moreover, the study's findings regarding the positive effect of earnings management on performance, which suggests efficiency motives behind earnings management practices in Africa, demonstrate that the African context is uniquely different from other emerging markets that report opportunistic motives. Concerning the moderating role, our study reveals that the positive effect of earnings management on the financial performance of firms tends to be stronger in the presence of corporate governance quality.

Jobs against poverty: a fixed-effects analysis on the link between gaining employment and exiting poverty in Europe

ABSTRACT This article analyses the role of gaining employment in escaping poverty at the individual level by using EU-SILC pooled panel data for 2010–2017 for 30 European countries. We assess this in a dynamic research setting using individual fixed effects that take into account unobserved time-invariant heterogeneity between individuals. We focus on the type and intensity of employment and the role of gender, education, and age. Overall, gaining employment increased the chances of exiting poverty by 33 percentage points among men and 30 percentage points among women. Shorter employment spells and part-time employment were less effective routes out of poverty. The results also suggest that poor individuals with higher education were more likely to benefit from employment to exit poverty. We found substantial cross-country variation. However, the unemployment rate, prevalence of precarious employment or spending on active labour market policies did not moderate the association between gaining employment and exiting poverty. Further analysis is needed on the institutional factors supporting poor people’s employment and its effectiveness in significantly improving income level.

Does clean cooking energy improve mental health? Evidence from China

Existing studies that evaluate the impact of cooking with solid fuels on human beings understate the negative effect on mental health. This paper attempts to fill this gap by investigating the impact of cooking energy transition on depression and the cognitive abilities of middle-aged and elderly people. Base on a large panel data set from China, we applied several complementary methods—propensity score matching, “difference-in-differences”, and fixed-effect model to overcomes the challenges of treatment selection bias and unobserved time-invariant heterogeneity that might have prevented us from identifying the causal effect. Depression outcomes and cognitive ability are measured by the Center for Epidemiological Studies Depression Brief Scale (CES-D) and a series of high-quality cognitive tests, respectively. The results reveal that cooking energy transition can significantly reduce the CES-D index and the rate of depression and improve cognitive reasoning ability in the middle-aged and elderly but has no significant impact on cognitive memory ability. Moreover, the effect is more salient for certain groups, such as females, rural residents, southern residents and middle-income families. Finally, potential pathways through which cooking energy transition affects mental health, including physical health, social activities, labour participation and medical expenditures, are discussed.

Farm-level production diversity and child and adolescent nutrition in rural sub-Saharan Africa: a multicountry, longitudinal study

Child malnutrition remains widespread in sub-Saharan Africa, especially in rural areas where many households are involved in subsistence farming. Increasing farm-level production diversity (FPD) is often considered a useful strategy to improve child diets and nutrition, but the empirical evidence is mixed. Most studies have investigated associations between FPD and dietary diversity. We therefore aimed to analyse associations between FPD and child and adolescent nutritional status. In this multicountry, longitudinal study, we used representative panel data from four countries in sub-Saharan Africa (Ethiopia, Malawi, Tanzania, and Uganda) to test the hypothesis that higher FPD is positively associated with child and adolescent nutritional status. The data were from the Living Standards Measurement Study-Integrated Surveys on Agriculture collected between 2008 and 2019. We included data from all children and adolescents aged 0-18 years with available anthropometric data who were living in households involved in farming activities for home consumption, market sales, or both. FPD was measured in terms of the number of different crop and livestock species and food groups produced on each farm. Child and adolescent nutritional status was measured in terms of height-for-age Z scores (HAZ). We estimated panel data regression models with correlated random effects to control for confounding factors and time-invariant unobserved heterogeneity. The total sample size included 50 689 child and adolescent observations. In combined models, with data from all countries included, we found one additional species produced on the farm (crop and livestock combined) was associated with a mean 0·015 SD greater child or adolescent HAZ (p<0·0001). The role of FPD tended to decrease with better market access (in more remote locations mean 0·020 SD [p<0·0001] and in less remote locations mean 0·008 SD [p=0·091]). In individual-country models, the effects were smaller and statistically insignificant in three of the four countries. Livestock diversity had larger positive associations with HAZ than crop diversity (livestock diversity effect on HAZ mean 0·085 SD [p<0·0001] and crop diversity effect on HAZ mean 0·007 SD [p=0·080]). In Tanzania and Uganda, higher crop diversity was negatively associated with child and adolescent HAZ. Our findings suggest that further farm-level diversification is not a suitable general strategy to improve child and adolescent nutrition but might be useful in some situations. Livestock production seems to be conducive for improving child and adolescent nutrition on average. Context-specific approaches need to be developed. None.