Showing papers on "Panel data published in 2007"

Growth and Human Capital: Good Data, Good Results

Abstract: We present a new data set for years of schooling across countries for the 1960-2000 period. The series are constructed from the OECD database on edu- cational attainment and from surveys published by UNESCO. Two features that improve the quality of our data with respect to other series, particularly for series in first-differences, are the use of surveys based on uniform classification systems of education over time, and an intensified use of information by age groups. As a result of the improvement in quality, these new series can be used as a direct substitute for Barro and Lee's (2001; Oxford Economic Papers, 3, 541-563) data in empirical research. In standard cross-country growth regressions we find that our series yield significant coefficients for schooling. In panel data estimates our series are also sig- nificant even when the regressions account for the accumulation of physical capital. Moreover, the estimated macro return is consistent with those reported in labour studies. These results differ from the typical findings of the earlier literature and are a consequence of the reduction in measurement error in the series.

Uncertainty and Investment Dynamics

Abstract: This paper shows that with (partial) irreversibility higher uncertainty reduces the responsiveness of investment to demand shocks. Uncertainty increases real option values making firms more cautious when investing or disinvesting. This is confirmed both numerically for a model with a rich mix of adjustment costs, time-varying uncertainty, and aggregation over investment decisions and time and also empirically for a panel of manufacturing firms. These “cautionary effects” of uncertainty are large—going from the lower quartile to the upper quartile of the uncertainty distribution typically halves the first year investment response to demand shocks. This implies the responsiveness of firms to any given policy stimulus may be much weaker in periods of high uncertainty, such as after the 1973 oil crisis and September 11, 2001.

The German Socio-Economic Panel Study (SOEP) - Scope, Evolution and Enhancements SOEPpapers on Multidisciplinary Panel Data Research

Abstract: After the introduction in Section 2, we very briefly sketch out current theoretical and empiri-cal developments in the social sciences. In our view, they all point in the same direction: to-ward the acute and increasing need for multidisciplinary longitudinal data covering a wide range of living conditions and based on a multitude of variables from the social sciences for both theoretical investigation and the evaluation of policy measures. Cohort and panel studies are therefore called upon to become truly interdisciplinary tools . In Section 3, we describe the German Socio-Economic Panel Study (SOEP), in which we discuss recent improvements of that study which approach this ideal and point out existing shortcomings. Section 4 concludes with a discussion of potential future issues and developments for SOEP and other household panel studies. Keywords: SOEP, household panel studies, survey design JEL Classification : C81, C91, D10, D31, D63, D80, I0, J0, N34, P36, R23, Z13 Acknowledgement

Institutional Determinants of Foreign Direct Investment

Abstract: In this paper, we contribute to the literature on the determinants of foreign direct investment in developing countries and re-evaluate the role of the quality of institutions on FDI independently of the general level of development. We implement cross-section estimations based on a newly available database with unprecedented detail on institutions for a set of 52 countries, as well as panel data estimations based on Fraser Institute's data. Furthermore, we control for the correlation between institutions and GDP per capita and for endogeneity of institutions. Finally, we evaluate whether the similarity of institutions between the host and the origin country raises bilateral FDI. We find that a wide range of institutions, including bureaucracy, corruption, but also information, banking sector and legal institutions, do matter for inward FDI independently of GDP per capita. Interestingly, weak capital concentration and strong employment protection tend to reduce inward FDI. Institutional proximity between the origin and the host country also matters, but we find little impact of institutions in the origin country. These results are encouraging in the sense that efforts towards raising the quality of institutions and making them converge towards those of source countries may help developing countries to receive more FDI, independently of the indirect impact of higher GDP per capita. The orders of magnitude found in the paper are large, meaning that moving from a low level to a high level of institutional quality could have as much impact as suddenly becoming a neighbour of a source country.

Transition Modeling and Econometric Convergence Tests

Abstract: A new panel data model is proposed to represent the behavior of economies in transition allowing for a wide range of possible time paths and individual heterogeneity. The model has both common and individual specific components and is formulated as a nonlinear time varying factor model. When applied to a micro panel, the decomposition provides flexibility in idiosyncratic behavior over time and across section, while retaining some commonality across the panel by means of an unknown common growth component. This commonality means that when the heterogeneous time varying idiosyncratic components converge over time to a constant, a form of panel convergence holds, analogous to the concept of conditional sigma convergence. The paper provides a framework of asymptotic representations for the factor components which enables the development of econometric procedures of estimation and testing. In particular, a simple regression based convergence test is developed, whose asymptotic properties are analyzed under both null and local alternatives, and a new method of clustering panels into club convergence groups is constructed. These econometric methods are applied to analyze convergence in cost of living indices among 19 US. metropolitan cities.

Transition Modeling and Econometric Convergence Tests

Abstract: A new panel data model is proposed to represent the behavior of economies in transition, allowing for a wide range of possible time paths and individual heterogeneity. The model has both common and individual specific components, and is formulated as a nonlinear time varying factor model. When applied to a micro panel, the decomposition provides flexibility in idiosyncratic behavior over time and across section, while retaining some commonality across the panel by means of an unknown common growth component. This commonality means that when the heterogeneous time varying idiosyncratic components converge over time to a constant, a form of panel convergence holds, analogous to the concept of conditional sigma convergence. The paper provides a framework of asymptotic representations for the factor components that enables the development of econometric procedures of estimation and testing. In particular, a simple regression based convergence test is developed, whose asymptotic properties are analyzed under both null and local alternatives, and a new method of clustering panels into club convergence groups is constructed. These econometric methods are applied to analyze convergence in cost of living indices among 19 U.S. metropolitan cities.

International Migration: A Panel Data Analysis of the Determinants of Bilateral Flows

Abstract: In this paper I empirically investigate the determinants of migration inflows into fourteen OECD countries by country of origin, between 1980 and 1995. I analyze the effect on migration of average income and income dispersion in destination and origin countries. I also examine the impact of geographical, cultural, and demographic factors as well as the role played by changes in destination countries' migration policies. My analysis both delivers estimates consistent with the predictions of the international migration model and generates empirical puzzles.

Consumption Risk, Technology Adoption and Poverty Traps: Evidence From Ethiopia

Abstract: Much has been written on the determinants of input and technology adoption in agriculture, with issues such as input availability, knowledge and education, risk preferences, profitability, and credit constraints receiving much attention This paper focuses on a factor that has been less well documented: the differential ability of households to take on risky production technologies for fear of the welfare consequences if shocks result in poor harvests Building on an explicit model, this is explored in panel data for Ethiopia Historical rainfall distributions are used to identify the counterfactual consumption risk Controlling for unobserved household and time-varying village characteristics, it emerges that not just exante credit constraints, but also the possibly low consumption outcomes when harvests fail, discourage the application of fertiliser The lack of insurance causes inefficiency in production choices

Panel data analysis—advantages and challenges

Abstract: We explain the proliferation of panel data studies in terms of (i) data availability, (ii) the more heightened capacity for modeling the complexity of human behavior than a single cross-section or time series data can possibly allow, and (iii) challenging methodology. Advantages and issues of panel data modeling are also discussed.

Effects of working capital management on SME profitability

Abstract: Purpose – The object of the research presented in this paper is to provide empirical evidence on the effects of working capital management on the profitability of a sample of small and medium‐sized Spanish firms.Design/methodology/approach – The authors have collected a panel of 8,872 small to medium‐sized enterprises (SMEs) covering the period 1996‐2002. The authors tested the effects of working capital management on SME profitability using the panel data methodology.Findings – The results, which are robust to the presence of endogeneity, demonstrate that managers can create value by reducing their inventories and the number of days for which their accounts are outstanding. Moreover, shortening the cash conversion cycle also improves the firm's profitability.Originality/value – This work contributes to the literature in two ways. First, no previous such evidence exists for the case of SMEs. Second, unlike previous studies, in the current work robust test have been conducted for the possible presence of e...

Market Entry Costs, Producer Heterogeneity, and Export Dynamics

Abstract: As the exchange rate, foreign demand, and production costs evolve, domestic producers are continually faced with two choices: whether to be an exporter and, if so, how much to export. We develop a dynamic structural model of export supply that characterizes these two decisions. The model embodies plant-level heterogeneity in export profits, uncertainty about the determinants of future profits, and market entry costs for new exporters. Using a Bayesian Monte Carlo Markov chain estimator, we fit this model to plant-level panel data on three Colombian manufacturing industries. We obtain profit function and sunk entry cost coefficients, and use them to simulate export responses to shifts in the exchange-rate process and several types of export subsidies. In each case, the aggregate export response depends on entry costs, expectations about the exchange rate process, prior exporting experience, and producer heterogeneity. Export revenue subsidies are far more effective at stimulating exports than policies that subsidize entry costs.

Financial Development and Economic Growth: New Evidence from Panel Data

Abstract: This study provides new evidence on the role of financial development in accounting for economic growth. To derive feasible policy implications, we estimate not only unbalanced panel regressions with period fixed effects, but also variance decompositions of annual GDP growth rates to examine what proxy measures are most important in economic growth over time and how much they contribute to economic growth across geographic regions and income groups. We find strong linkages between financial development and economic growth in high-income OECD countries, but not in South Asian and Sub-Saharan African regions. Therefore, it may be necessary to make different efforts to achieve steady economic growth across geographic regions and income groups.

Does the stock market value bank diversification

Abstract: This paper investigates whether or not functionally diversified banks have a comparative advantage in terms of long-term performance/risk profile compared to their specialized competitors. To that end, this study uses market-based measures of return potential and bank risk. We calculate the franchise value over time of European banks as a measure of their long-run performance potential. In addition, we measure risk as both the systematic and the idiosyncratic risk components derived from a bank stock return model. Finally, we analyze the return/risk trade-off implied in different functional diversification strategies using a panel data analysis over the period 1989–2004. A higher share of non-interest income in total income affects banks’ franchise values positively. Diversification of revenue streams from distinct financial activities increases the systematic risk of banks while the effect on the idiosyncratic risk component is non-linear and predominantly downward-sloping. These findings have conflicting implications for different stakeholders, such as investors, bank shareholders, bank managers and bank supervisors.

Modelling Credit Risk for SMEs: Evidence from the U.S. Market

Abstract: Considering the fundamental role played by small and medium sized enterprises (SMEs) in the economy of many countries and the considerable attention placed on SMEs in the new Basel Capital Accord, we develop a distress prediction model specifically for the SME sector and to analyse its effectiveness compared to a generic corporate model. The behaviour of financial measures for SMEs is analysed and the most significant variables in predicting the entities’ credit worthiness are selected in order to construct a default prediction model. Using a logit regression technique on panel data of over 2,000 U.S. firms (with sales less than $65 million) over the period 1994–2002, we develop a one-year default prediction model. This model has an out-of-sample prediction power which is almost 30 per cent higher than a generic corporate model. An associated objective is to observe our model's ability to lower bank capital requirements considering the new Basel Capital Accord's rules for SMEs.

Imports and Exports at the Level of the Firm: Evidence from Belgium

Abstract: This paper explores a newly-available panel data set merging balance sheet and international trade transaction data for Belgium. Both imports and exports appear to be highly concentrated among few firms and seem to have become more so over time. Focusing on manufacturing, we find that facts previously reported in the literature for exports only actually apply to imports too. We note that the number of trading firms diminishes as the number of export destinations or import origins increases. The same is true if we consider the number of products traded. With regard to productivity differentials, firms that both import and export appear to be the most productive, followed, in descending order, by importers only, exporters only and non-traders. These results point to the presence of fixed costs; not only of exporting, but also of importing and to a process of self-selection in both export and import markets. Also, the productivity advantage of exporters reported in the literature may be overstated because imports were not considered.

Large Shareholders and Corporate Policies

Abstract: We develop an empirical framework that allows us to analyze the effects of heterogeneity across large shareholders, and we construct a new blockholder-firm panel data set in which we can track all unique blockholders among large U.S. public firms. We find statistically significant and economically important blockholder fixed effects in investment, financial, and executive compensation policies. This evidence suggests that blockholders vary in their beliefs, skills, or preferences. Different large shareholders have distinct investment and governance styles: they differ in their approaches to corporate investment and growth, their appetites for financial leverage, and their attitudes towards CEO pay. We also find blockholder fixed effects in firm performance measures, and differences in style are systematically related to firm performance differences. Our results are consistent with influence for activist, pension fund,corporate, individual, and private equity blockholders, but consistent with systematic selection for mutual funds. Finally, we analyze sources of the heterogeneity, and find that blockholders with a larger block size, board membership, direct management involvement as officers, or with a single decision maker are associated with larger effects on corporate policies and firm performance.

Unemployment and self-assessed health: Evidence from panel data

Abstract: We analyse the relationship between unemployment and self-assessed health using the European Community Household Panel (ECHP) for Finland over the period 1996-2001. Our results reveal that the event of becoming unemployed does not matter as such for self-assessed health. The health status of those that end up being unemployed is lower than that of the continually employed. Hence, persons who have poor health are being selected for the pool of the unemployed. This explains why, in a cross-section, unemployment is associated with poor self-assessed health. However, we are somewhat more likely to obtain the negative effects of unemployment on health when long-term unemployment is used as the measure of unemployment experience.

Capital structure and corporate performance: evidence from Jordan

Abstract: This study is to investigate the effect which capital structure has had on corporate performance using a panel data sample representing of 167 Jordanian companies during 1989-2003. Our results showed that a firm’s capital structure had a significantly negative impact on the firm’s performance measures, in both the accounting and market’s measures. We also found that the short-term debt to total assets (STDTA) level has a significantly positive effect on the market performance measure (Tobin’s Q). The Gulf Crisis 1990-1991 was found to have a positive impact on Jordani an corporate performance while the out break of Intifadah in the West Bank and Gaza in September 2000 had a negative impact on corporate performance.

Effects of Innovation on Employment: A Dynamic Panel Analysis

Abstract: This paper estimates the effect of innovation on employment at the firm level. Our uniquely long innovation panel data set of German manufacturing firms covers more than 20 years and allows us to use various innovation measures. We can distinguish between product and process innovations as well as between innovation inputs and innovation outputs. Using dynamic panel GMM system estimation we find positive effects of innovation on employment. This result is robust to the use of product and process innovations as well as for innovation input and output.

The Impact of Financial Constraints on Firms Survival and Growth

Abstract: We propose a new approach for identifying and measuring the degree of fnancial constraint faced by firms and use it to investigate the effect of financial constraints on firm survival and development. Using panel data on French manufacturing firms over the 1996 - 2004 period, we find that (i) financial constraints significantly increase the probability of exiting the market, (ii) access to external financial resources has a positive effect on the growth of firms in terms of sales, capital stock and employment, (iii) financial constraints are positively related with productivity growth in the short-run. We interpret this last result as the sign that constrained firms need to cut costs in order to generate the resources they cannot raise on financial markets.

Orphans and schooling in africa: a longitudinal analysis*

Abstract: AIDS deaths could have a major impact on economic development by affecting the human capital accumulation of the next generation. We estimate the impact of parent death on primary school participation using an unusual five-year panel data set of over 20,000 Kenyan children. There is a substantial decrease in school participation following a parent death and a smaller drop before the death (presumably due to pre-death morbidity). Estimated impacts are smaller in specifications without individual fixed effects, suggesting that estimates based on cross-sectional data are biased toward zero. Effects are largest for children whose mothers died and, in a novel finding, for those with low baseline academic performance.

Determinants of Corporate Dividend Policy in Jordan: An Application of the Tobit Model

Abstract: This paper examines the determinants of corporate dividend policy in Jordan. The study uses a firm‐level panel data set of all publicly traded firms on the Amman Stock Exchange between 1989 and 2000. The study develops eight research hypotheses, which are used to represent the main theories of corporate dividends. A general‐to‐specific modeling approach is used to choose between the competing hypotheses. The study examines the determinants of the amount of dividends using Tobit specifications. The results suggest that the proportion of stocks held by insiders and state ownership significantly affect the amount of dividends paid. Size, age, and profitability of the firm seem to be determinant factors of corporate dividend policy in Jordan. The findings provide strong support for the agency costs hypothesis and are broadly consistent with the pecking order hypothesis. The results provide no support for the signaling hypothesis.

Debt policy and performance of SMEs; Evidence from Ghanaian and South African Firms

Abstract: Purpose – The purpose of this research is to examine the effect of debt policy (capital structure) on the financial performance of small and medium‐sized enterprises (SMEs) in Ghana and South Africa. Previous studies, especially on large firms, have shown that capital structure affects firm performance. Though the issue has been widely studied, largely missing from this body of literature is the focus on SMEs.Design/methodology/approach – Panel data analysis is used to investigate the relations between measures of capital structure and financial performance.Findings – Using various measures of performance, the results of this study indicate that capital structure influences financial performance, although not exclusively. By and large, the results indicate that capital structure, especially long‐term and total debt ratios, negatively affect performance of SMEs. This suggests that agency issues may lead to SMEs pursuing very high debt policy, thus resulting in lower performance.Originality/value – The main...