State dependence,serial correlation and heterogeneity in the union membership dynamics

In order to distinguish the true and spurious state dependence from the complicated dynamics of union membership, the simulation estimators incorporating the lagged dependent variables, unobserved individual heterogeneity and correlations among the errors are implemented in this article to study union membership dynamics. It is found that the true state dependence of union membership under multivariate t assumption is much higher than the standard dynamic panel probit estimators which are under multivariate normal assumptions. On the other hand, the spurious state dependence (the variance of the unobserved individual heterogeneity) is estimated to be higher when using the standard dynamic panel probit estimators than under multivariate t assumption. Moreover, blacks and married men are found to have higher union membership true state dependence than whites and unmarried men.     

Patterns of poverty among elderly Americans: a latent class Markov model

This article studies poverty persistence and the role of social security programmes on poverty among elderly in the US. We use a Latent Markov model to disentangle unobserved heterogeneity and state dependence. Because of its dynamic nature, unobserved heterogeneity is modelled to vary over time. This allows to capture different latent states of poverty that change over time. Result indicates the existence of three unobserved types evolving over time according to their propensity to be poor. Moreover, a strong persistence in poverty especially for women, individuals living alone and ethnic minorities is found. Finally, the estimates indicate that giving social assistance tends to reduce poverty.     

HETEROGENEITY OR TRUE STATE DEPENDENCE IN POVERTY: THE TALE TOLD BY TWINS

The purpose of this study is to distinguish between two different reasons that poverty could persist on an individual level. This study takes advantage of the similarity within pairs of identical twins to separate family‐specific heterogeneity from true state dependence, where the experience of poverty leads to a higher risk of future poverty. The results, based on a four‐variate probit model, show the importance of true state dependence in poverty. When using a poverty measure based on disposable income, family‐specific heterogeneity explains between 21 and 25 percent of poverty persistence in the Swedish sample of twins.     

Childbirth and poverty in Europe: A dynamic bivariate approach

We use the 2015–2018 European Union Statistics on Income and Living Conditions panel data and a dynamic bivariate probit model to estimate the impact of childbirth on the risk of poverty in 25 European countries. We model both poverty and childbirth mechanisms, identifying genuine state dependence and accounting for feedback effects from past poverty to childbirth. We find that childbirth slightly increases the risk of poverty in Europe, but some heterogeneities emerge at the country level. When disentangling the effects of childbirth conditional on past poverty status, it appears that childbirth determines redistributive effects possibly induced by welfare systems. We find evidence of genuine state dependence and suggests that discouraging factors induced by the experience of poverty itself has increased over time. The risk of poverty is triggered by the presence of dependent members in the household, while education and employment stability are helpful to combat poverty.     

Health care expenditure and income in the OECD reconsidered: Evidence from panel data

This paper reconsiders the long-run economic relationship between health care expenditure and income using a panel of 20 OECD countries observed over the period 1971–2004. In particular, the paper studies the non-stationarity and cointegration properties between health care spending and income. This is done in a panel data context controlling for both cross-section dependence and unobserved heterogeneity. Cross-section dependence is modelled through a common factor model and through spatial dependence. Heterogeneity is handled through fixed effects in a panel homogeneous model and through a panel heterogeneous model. Our findings suggest that health care is a necessity rather than a luxury, with an elasticity much smaller than that estimated in previous studies.     

Financial development and the share of imported capital goods in developing countries: firm-level evidence

Firm-level estimations across a sample of seven developing countries suggest that a higher firm’s leverage – a proxy for credit constraints – reduces the share of imported capital goods in total capital expenditures. This result holds across different models such as a two-limit tobit and a fractional logit model. It is also confirmed after controlling for unobserved firm heterogeneity, state dependence or when using the share of property in total assets as an alternative credit constraint indicator. The results also indicate that the importance of credit constraints is significantly reduced in financially more developed countries.     

State Dependence in Welfare Benefits in a Non-Welfare Context

This study investigates state dependence in social assistance benefits in Turkey, where benefit receipt and persistence rates have significantly increased over the past decade. We estimate state dependence through dynamic random-effects probit models, controlling for observed and unobserved heterogeneity, and endogenous initial conditions. In particular, we employ Wooldridge’s estimator to achieve consistent and correct estimates of state dependence and compare the results with estimates from Heckman’s reduced-form approach as a sensitivity check. Both estimators enable us to disentangle true state dependence from its spurious components and address the potential bias due to the short panel length. Our results suggest that the receipt of benefits in the last year increases the likelihood of benefit receipt in the current year, namely the structural state dependence, by 17.2–19.5 percentage points.     

Youth Poverty,Employment, and Leaving the Parental Home in Europe

This paper studies the nature of youth poverty dynamics in Europe. First, it analyzes to what extent experiencing poverty in a given period is in itself positively related to the probability of living below the poverty line again in the future. That is, we assess the degree of poverty genuine state dependence among young people. Second, we study the interrelationships between poverty, employment, and residential emancipation. The results show that youth poverty genuine state dependence is positive and highly significant, but this scarring effect is short‐lived in Scandinavia compared to Southern or Continental Europe. Moreover, although we find a strong association between poverty and leaving home in Nordic countries, time spent in economic hardship does not last long. On the contrary, in Spain and Italy, young adults tend to leave their parental home much later in order to avoid falling into a poverty state that is more persistent.     

Is health care a luxury? The debate revisited with new evidence from emerging economies

This paper studies the long-run relationship between health care expenditure and income using a panel data set of emerging economies over the period 1995–2012. The results show that expenditure on health care and income are non-stationary and cointegrated. After controlling for cross-sectional dependence and unobserved heterogeneity among different countries, we find that the income elasticity of health care is less than 1, indicating that health care is a necessity and not a luxury. Government expenditure and out-of-pocket expenditure turn out to be important determinants of health care expenditure. Among non-monetary factors, results show that old age dependency and female education seem to have significant bearings on health care expenditures. Policy recommendations suggest that government should increase spending on health care in emerging economies since higher incomes may not automatically translate into higher health care spending by the people of these countries.     

Poverty, inequality, and growth in urban China, 1986–2000

Although urban China has experienced spectacular income growth over the last two decades, increases in inequality, reduction in social welfare provision, deregulation of grain prices, and increases in income uncertainty in the 1990s have increased urban poverty. Using a large repeated cross section household survey from 1986 to 2000, this study maps the changes in income, inequality, and poverty over the fifteen-year period and investigates the determinants of poverty. We find that the increase in poverty in the 1990s is associated with the increase in the relative food price and the need to purchase items that were previously provided free or at highly subsidized prices by the state, i.e., education, housing and medical care. In addition, the increased saving rate of poor households, which is due to an increase in income uncertainty, contributes significantly to the increase in poverty measured in terms of expenditure. Journal of Comparative Economics 33 (4) (2005) 710–729.     

The effects of government expenditure on imports in the Eurozone reconsidered: evidence from panel data

This study examines the impact of government expenditure on imports. The empirical analysis is based on annual data of the euro area countries for the period 1995–2015. We employ econometric methods that mitigate heterogeneity and cross-sectional dependence. We provide empirical indications that the components of expenditure have different impact on imports demand. The findings of this study indicate that the import context of government expenditure is lower than the import context of others expenditure components. Finally, we find that an increase in government expenditure leads to an increase in imports; this implies that, ceteris paribus that it can lead to a deterioration of the trade balance.     

APPLICATION OF PANEL DATA MODELS IN BENCHMARKING ANALYSIS OF THE ELECTRICITY DISTRIBUTION SECTOR*

ABSTRACT ** : This paper explores the application of several panel data models in measuring productive efficiency of the electricity distribution sector. Stochastic Frontier Analysis has been used to estimate the cost‐efficiency of 59 distribution utilities operating over a nine‐year period in Switzerland. The estimated coefficients and inefficiency scores are compared across three different panel data models. The results indicate that individual efficiency estimates are sensitive to the econometric specification of unobserved firm‐specific heterogeneity. This paper shows that alternative panel models such as the ‘true’ random effects model proposed by Greene (2005) could be used to explore the possible impacts of unobserved firm‐specific factors on efficiency estimates. When these factors are specified as a separate stochastic term, the efficiency estimates are substantially higher suggesting that conventional models could confound efficiency differences with other unobserved variations among companies. On the other hand, refined specification of unobserved heterogeneity might lead to an underestimation of inefficiencies by mistaking potential persistent inefficiencies as external factors. Given that specification of inefficiency and heterogeneity relies on non‐testable assumptions, there is no conclusive evidence in favour of one or the other specification. However, this paper argues that alternative panel data models along with conventional estimators can be used to obtain approximate lower and upper bounds for companies' efficiency scores.     

A measurement of affluence and poverty interdependence across countries: Evidence from the application of tail copula

This paper examines affluence and poverty interdependence across 185 countries and its evolution over 1969–2014. To estimate affluence and poverty interdependence and derive tail interdependences the tail copulae are applied to multivariate density function. The tail coefficients are estimated in the non-parametric way as in Schmidt and Stadtmüller (2006). The estimates show, that poverty is less interdependent and continue to decrease, while affluence has asymptotically high global dependence, meaning a higher global dependence on and sensitivity to the well-being of the affluent countries. The received results derive the pattern of the extreme interdependence and can help to identify poverty and affluence spill-over across countries and regions and calculate the average sensitivity of a country to these phenomena on the global level and can potentially help in poverty reduction strategies within the Sustainable Development Goal by the United Nations.     

Non-linearities in euro area inflation persistence

This paper investigates the nature of inflation dynamics with a special focus on inflation persistence. Using data from euro area member-states we estimate dynamic non-linear panel models addressing in detail econometric issues concerning unobserved heterogeneity, genuine state dependence, and the initial conditions problem. After controlling for observed and unobserved heterogeneity, our results suggest that the degree of inflation persistence is genuine and varies depending on whether the inflation rate is too high, within the range of ECB's target of price stability, too low or negative. This implies that policies to stabilize inflation in the short run will have longer-run effects.     

Extremal Economic (Inter)Dependence Studies: A Case of the Eastern European Countries

This paper considers the application of copula models to study the shifts in extremal economic dependence of the Eastern European countries, i.e., Ukraine and its neighbouring countries, from 1969 to 2014. Extremal economic dependence is analysed in terms of poverty and affluence and with regard to growth rate. This paper contributes to the previous literature by applying the copula approaches to derive the measurements of the economic interdependence in terms of poverty and affluence. The received results depict the pattern of the (inter)dependence and its evolution across the analysed countries. Dependence on other countries in the extreme values can potentially be useful in adjustments of the economic policy of a country to minimize poverty and prevent high inequality.

     

GOVERNMENT TRANSPARENCY AND EXPENDITURE IN THE RENT‐SEEKING INDUSTRY: THE CASE OF JAPAN FOR 1998–2004

Since the end of the 1990s, local governments in Japan have enacted Information Disclosure Ordinances, which require the disclosure of official government information. This article uses Japanese prefecture‐level data for the period 1998–2004 to examine how this enactment affected the rate of government construction expenditure. The Dynamic Panel model is used to control for unobserved prefecture‐specific effects and endogenous bias. The major finding is that disclosure of government information reduces the rate of government construction expenditure. This implies that information disclosure reduces losses from rent‐seeking activity, which is consistent with public choice theory. (JEL D73, D78, H79)     

Growth,inequality, and poverty reduction in developing countries: Recent global evidence

The study presents comparative global evidence on the transformation of economic growth to poverty reduction in developing countries, with emphasis on the role of income inequality. The focus is on the period since the early-mid-1990s when growth in these countries as a group has been relatively strong, surpassing that of the advanced economies. Both regional and country-specific data are analyzed for the $1.25 and $2.50-level poverty headcount ratios using World Bank Povcalnet data. The study finds that on average income growth has been the major driving force behind both the declines and increases in poverty. The study, however, documents substantial regional and country differences that are masked by this ‘average’ dominant-growth story. While in the majority of countries, growth was the major factor behind falling or increasing poverty, inequality, nevertheless, played the crucial role in poverty behavior in a large number of countries. And, even in those countries where growth has been the main driver of poverty-reduction, further progress could have occurred under relatively favorable income distribution. For more efficient policymaking, therefore, idiosyncratic attributes of countries should be emphasized. In general, high initial levels of inequality limit the effectiveness of growth in reducing poverty while growing inequality increases poverty directly for a given level of growth. It would seem judicious, therefore, to accord special attention to reducing inequality in certain countries where income distribution is especially unfavorable. Unfortunately, the present study also points to the limited effects of growth and inequality-reducing policies in low-income countries.     

True versus spurious state dependence in firm performance

This paper analyzes the persistence of firms’ exporting behavior in a panel of German manufacturing firms using dynamic binary choice models. We distinguish between true and spurious state dependence in exports and apply fixed effects methods that allow us to verify the robustness of our results to critical assumptions on firms’ initial export status. We find robust evidence of state dependence in the current export status of firms. We also document an important role of unobserved permanent firm heterogeneity (spurious state dependence) and quantify the relative importance of different export determinants. Our results, which are consistent with the findings of previous studies on firms in developing countries and in the United States, show the presence of important sunk costs in export market entry and a depreciation of knowledge and experience in export markets. This paper benefitted substantially from three anonymous referees and Bernd Fitzenberger, one of the editors of this journal. The authors wish to thank the Centre for European Economic Research (ZEW), Mannheim, for its hospitality during the time this study was carried out. Both authors gratefully acknowledge helpful comments received at a workshop hosted by the Centre for Applied Microeconometrics, University of Copenhagen workshop, especially those from Bo Honoré. Useful discussions with Georg Licht also lead to improvements of this paper. We thank Ken Chay for sharing Gauss codes used in parts of the paper. Lastly, we would like to thank Bettina Peters, a member of the ZEW team that compiles the data set used in this study, for data guidance and numerous helpful comments. The activities of the Centre for Applied Microeconometrics are financed by a grant from the Danish National Research Foundation.     

Trade Elasticities

Conventional aggregate trade elasticity estimates hardly vary across countries. We introduce an aggregate elasticity that is implied by theory: It is the value that equates the welfare gains from trade as implied by one‐ and multi‐sector versions of the model in Arkolakis et al. (American Economic Review, 102 (2012):94–130). These estimates are predicated on sector‐level values for trade elasticites, which we provide at three‐digit levels for 28 developed and developing countries. The values for this aggregate elasticity vary greatly across countries, and they do so because of countries' patterns of production and because a given sector‐level elasticity displays considerable cross‐country heterogeneity.     

HOUSEHOLD NEEDS AND POVERTY: WITH APPLICATION TO SPAIN AND THE U.K.

We examine the sensitivity of U.K.-Spanish poverty comparisons to variations in the dependence of equivalence scales on household size and composition, using evidence from national household budget surveys. We sum up these comparisons using subjective confidence levels. Taking into account the dissimilarities in the distribution of incomes and needs across countries, we find, inter alia , that although the poor are typically more numerous in Spain than in Britain, the actual headcount differences may vary by up to 10 percent of the population when needs allowances are altered, even when kept the same across the two countries. Comparisons of poverty composition across the two countries are also very sensitive to the choice of equivalence scale parameters. Generally, however, the proportion of single adults among the poor is much less important in Spain than in Britain, the reverse being true for households with three or more adults.