Economies, Volume 11, Issue 6 (June 2023) – 21 articles

Micro and small industries (MSIs) must utilize digital technology if they hope to meet obstacles and endure in a market that is always evolving owing to technological advancements. This study aims to examine the capacity of business factors, marketing factors, constraint factors, credit factors, entrepreneur factors, and firm factors as determinants of digital innovation proxied by internet adoption and internet usage levels (for communication and information, for promotion, for buying and selling, and for fintech). This study uses a sample size of 90,295 MSIs and secondary data from the MSIs survey in 2019. As analytical tools, logit and ordinary least square (OLS) were employed. The findings demonstrate that business factors, marketing factors, constraint factors, credit factors, entrepreneur factors, and MSIs’ firm factors are substantial and continuously affect digital innovation, and primarily its influence is as a motivator. These results will hopefully offer insights for the government as consideration regarding policies on how to encourage MSIs’ digital innovation, and for MSIs themselves as references when they are about to make digital innovation decisions. Full article

The objective of this research is to examine the relationship between carbon management strategies in corporations and their impact on financial performance. We employ a systematic literature review to analyze 223 articles retrieved from reputable journals indexed in Scopus. A total of 22 empirical studies covering various industry sectors and countries were selected and included in our analysis. The result indicates that 59% of the articles demonstrate positive findings. Among these, 50% show a significant positive impact, while 9% exhibit mixed results with both positive and negative outcomes in the short and long-term perspectives. These findings suggest that adopting carbon management strategies predominantly has a positive influence on corporate financial performance. In this study, we also provide a summary of the dependent, independent, and control variables, as well as commonly used indicators in this research topic, to help guide future quantitative research. Lastly, we offer a summary of the motivations, drivers, and barriers that corporations experience when implementing carbon management strategies. These insights will be valuable for business managers and policymakers, aiding them in successfully embarking on the journey to achieve net-zero emissions. Full article

This study’s primary objective is to investigate the impact of stressful living environments and extreme weather conditions on youth’s education. For the fulfillment of this objective, the unique and latest methodology, such as second-generation unit root, cross-sectional ARDL, and the Westerlund approach are used on panel data taken from India and Pakistan. The cross-sectional dependency test is also employed to determine the internal correlations between cross-sections. The results indicate that there are long- as well as short-run relationships between variables. This study helps to develop policies to manage natural disasters, as well as provide the theoretical background to reduce the stressful living environment. Full article

Given their increasing engagement with the global economy, emerging countries such as Peru depend on their export sector. This research evaluates the level of efficiency of Peruvian exports (EF) and the impact of four regional trade agreements (RTAs) (MERCOSUR, the EU, the European Free Trade Association (EFTA), and the Andean Community of Nations (CAN)), twelve bilateral agreements (BAs), the World Trade Organization (WTO), institutional distance (ID), cultural distance (CD), foreign direct investment (FDI), trade freedom (TF), and traditional (TX) and nontraditional exports (NTX) by sector on the export efficiency of Peru. This non-experimental study used a dataset of 38 countries from 1995 to 2019. An extended stochastic frontier gravity (SFGM) ten-variable model with the one-step estimation method was applied to estimate export efficiency. Poisson’s PML estimator was used to investigate the factors that impact export efficiency (EF). The results showed that the export efficiency of Peru was moderate, ranging between 0.462 and 0.458, with a stationary trend, indicating considerable export potential between Peru and its trading partners. The major contributors to this efficiency are ID (voice and accountability, corruption control, nonadherence to the rule of law), NTX (chemicals and metal mechanics), and BA with American countries. On the other hand, CD (indulgence, long-term orientation, individualism, uncertainty, and lack of a culture of achievement), TF, agreements with MERCOSUR and the EU, FDI, and TX weakened the efficiency of exports. Finally, CAN, EFTA, BA with Asian countries, FDI, TX, and WTO did not have a significant effect on the EF. Recommendations to policy makers are presented. Full article

In examining the effect of membership in the World Trade Organization (WTO) on the amounts of Aid for Trade (AfT) that accrue to developing countries, Lee et al. (2015) (The World Economy, 38, 2015 and 1462) have found that developing country members of the World Trade Organization (WTO) received higher AfT flows than non-WTO developing members. The present paper deepens the analysis by Lee et al. (2015) by investigating the effect of the duration of WTO membership on the amounts of AfT flows that accrue to recipient countries. The duration of membership in the WTO captures both the membership in the WTO and the time spent by a country in the organization. The main argument in this analysis is that the duration of WTO membership matters more than the mere WTO membership for the degree of liberalization in AfT recipient countries’ trade regimes and their participation in international trade, the latter being a critical determinant of the AfT flows supplied by donors. This analysis has relied on a panel dataset of 136 countries over the period from 2002 to 2019, and the two-step generalized method of moments estimator. It has established that countries receive higher AfT flows as their membership duration increases, and the amounts of these resource inflows increase as recipient countries further liberalize their trade regime and further participate in international trade. Additionally, the effect of the duration of WTO membership on total AfT flows depends on donor-countries’ commercial self-interest in recipient countries, including the latter’s economic growth performance and endowment in natural resources. Full article

This study examines the effects of product market competition on corporate investment and firm value and the moderating role of economic policy uncertainty on this relationship. The firm-level data of 1971 listed corporate firms for BRIC (Brazil, Russia, India, China) countries during 2009–2020 were used, totaling 23,652 observations. Using the GMM estimates, our results depict that product market competition significantly influences corporate investment and firm value in BRIC countries. The result also reveals that economic policy uncertainty plays a significant role in the impact of product market competition on corporate investment and firm value at Brazilian, Russian, Indian, and Chinese firms. The study’s findings contribute to the body of knowledge by providing new evidence on the relationship between PMC, corporate investment, and firm value. These findings are vital for policymakers and regulatory bodies to focus on economic uncertainty in a competitive environment without jeopardizing investment returns in emerging markets. Full article

We consider the impact of the two recent economic crises, one that resulted from the great recession of 2007–2009 and one following the COVID-19 pandemic, on income inequality and the risk of poverty in Greece. To this end, we also investigate the key macroeconomic variables affecting the Greek income distribution. We find that alternative measures of inequality and relative poverty have deteriorated during the years of crises, implying that the country’s response to economic shocks has been particularly harmful for its more disadvantaged citizens. Regarding the variables affecting the income distribution, we show that income inequality and the risk of poverty increase with growth, implying that the benefits of growth, and burdens of recession, are distributed unequally among members of the Greek society. Moreover, inequality appears to increase with unemployment and decrease with the share of wages and salaries in total income. This finding highlights the importance of labour market regulations and workers’ welfare for attaining equality. Finally, we provide evidence that, during pre-election periods, income inequality is reduced, meaning that the political budget cycles, which are characteristic of the Greek economy, generate gains in terms of equality, but these gains are short-lived and mainly benefit the middle bracket of the income distribution. Full article

Academic labor markets often exhibit steep hierarchies, with institutions at the top attempting to attract newly minted doctorates from similarly situated institutions in an effort to maintain or improve their reputations. Yet, despite recent research on labor market segmentation in academe, the literature has heretofore been under-theorized. This paper provides a straightforward formal model that generates a three-tiered hierarchy of academic institutions, wherein academic departments affiliated with top-tier universities endeavor to hire only from within the group, while those in the bottom tier are unable to employ faculty with degrees from top departments. The results from statistical tests applied to data from economics departments in the U.S. indicate that top-tier departments employ 3.5 to 3.8 (2.5 to 2.9) more assistant professors from top-tier institutions, ceteris paribus, than bottom (middle) tier departments. Full article

This paper reviews the literature on foreign direct investment (FDI), productivity, and technology upgrading, with a focus on macroeconomic and microeconomic models. It compares the performance of various models used to study FDI and its effects on firms’ productivity, via skill and technology upgrading, offshoring, institutional quality, and other related factors. This review highlights the differences and similarities between macroeconomic and microeconomic models, their empirical strategies, and their ability to provide a comprehensive understanding of the mechanisms through which FDI affects productivity and other variables. The empirical literature on the impact of FDI on the productivity of local firms is derived from association studies, which use a neoclassic production function and an augmented Solow-type equation. These models have been shown to be inadequate in capturing the dynamic and complex nature of FDI and the associated externalities, particularly vertical externalities. This paper identifies three criticisms of the literature on pecuniary externalities, including a lack of models that focus specifically on the mechanism of forward linkages, inadequate measures to assess linkage effects, and the failure to include crucial determinant factors in empirical models. Overall, this paper calls for more comprehensive and nuanced models that incorporate the dynamic and complex nature of FDI and its externalities. Full article

Though much attention is dedicated to the development of its research and innovation policy, the European Union constantly struggles to match the level of the strongest innovators in the world. Therefore, there is a necessity to analyze the individual efforts and conditions of the 27 member states that might determine their final innovative performance. The results of a scientific literature review showed that there is a growing interest in the usage of artificial intelligence when seeking to improve decision-making processes. Data envelopment analysis, as a branch of computational intelligence methods, has proved to be a reliable tool for innovation efficiency evaluation. Therefore, this paper aimed to apply DEA for the assessment of the European Union’s innovation efficiency from 2000 to 2020, when innovation was measured by patent, trademark, and design applications. The findings showed that the general EU innovation efficiency situation has improved over time, meaning that each programming period was more successful than the previous one. On the other hand, visible disparities were found across the member states, showing that Luxembourg is an absolute innovation efficiency leader, while Greece and Portugal achieved the lowest average efficiency scores. Both the application of the DEA method and the gathered results may act as viable guidelines on how to improve R&I policies and select future investment directions. Full article

The current study examines the moderating role of R&D expenditures by the government on the relationship between entrepreneurship and per capita output in GCC countries. Using secondary quantitative data, panel data analysis was conducted for six GCC countries (Saudi Arabia, Kuwait, Oman, Bahrain, Qatar, and UAE) based on their scores on the Global Entrepreneurship Index, Ease of Doing Business, and R&D expenditure as a percentage of GDP. Descriptive statistics and regression analysis were conducted using Eviews 12. The study found that a supportive business environment and entrepreneurship ecosystem can lead to higher per capita output and that laboratory force and capital are significant positive contributors to per capita output. However, both Ease of Doing Business and the Global Entrepreneurship Index have a significant negative impact on per capita output. The study did not find significant moderation of the relationship between entrepreneurship and per capita output by R&D expenditures. These findings have important implications for policy-makers and academia, emphasizing the significant labour force and capital for per capita output. Future research should explore the relationship between entrepreneurship and growth further and investigate the role of R&D. Policy recommendations include reducing regulatory burdens and providing tax incentives to create a supportive environment for entrepreneurship and increasing R&D funding to promote per capita output. Overall, this study contributes to the state of the art through examining the moderating role of R&D expenditures on the relationship between entrepreneurship and per capita output in the context of GCC countries. Full article

Youth entrepreneurship is an increasingly prominent aspect of entrepreneurship support policies, but there is surprisingly little relevant research-based empirical evidence. This research gap is particularly noticeable when it comes to the personal and contextual factors that steer young people’s decision to start a business. Using statistically representative survey data from the Global Entrepreneurship Monitor for Germany, we apply logit regressions to determine the influence of 10 independent variables on the likelihood of starting a business. We distinguish between 18–24-year-olds and 25–64-year-olds as well as between founders and non-founders. Self-efficacy in entrepreneurial skills, fear of failure and gender are the strongest influencing variables for the person-related factors and knowledge of other founders for the contextual factors. For younger people, the formal level of education and the perception of local entrepreneurial opportunities do not play a role in the decision to start a business, whereas they are very important for older people. Our results suggest that start-up promotion policies should explicitly address the empirically proven factors of youth entrepreneurship instead of a ‘one size fits all’ policy for new businesses, regardless of the age of the founders. Full article

This article constructs a multidimensional logistic model for predicting the employment of graduates of higher educational institutions trained under the program of academic mobility, using the example of Kazakh universities. The purpose of the research is to identify the relationship between academic mobility and the employment of university graduates, as well as the necessary skills and competencies that can promote academic mobility in higher education institutions. This paper presents the results of calculating correlation coefficients and conducting a chi-square test, which demonstrated a relationship between the dependent variable and other questions in the graduate questionnaire. After the discovery of pairwise relationships, a multivariate logistic model was built that included statistically significant categories of responses. As a result, it was determined that the usefulness of participation in the academic mobility program is influenced by foreign language proficiency, an increase in academic mobility, the development of educational programs based on the needs of the labor market, as well as an increase in the weight of those methods that form practical skills in information analysis and the creation of public spaces in the labor market. The model demonstrated good predictive properties, which can be used to predict those individuals who were helped by academic mobility in finding employment. Full article

In this new era of energy transition, access to reliable and correctly functioning electricity markets is a huge concern for all economies. The restructuring path taken by most electricity markets involves the movement towards green generation structures and the increasing integration of wind and solar photovoltaic energy sources. Furthermore, it involves the electrification of energy systems, which implies a substantial increase in electricity demand levels. It is also important to add that electricity use has been pivotal in achieving efficient productivity levels in many sectors and is thus crucial to boosting economic activity. Nevertheless, this shift in generation structures has raised several challenges in electricity markets, mainly because the electricity produced from wind and solar photovoltaics is intermittent. In turn, adopting green power sources has been claimed to increase electricity price volatility and thus increase pricing risks. Therefore, to ensure that the right market signals are being sent to investors, the behaviour of electricity prices should be carefully assessed. There are three main types of pricing mechanisms commonly used in electricity markets: zonal, uniform and nodal. This study provides a short literature survey on these three pricing mechanisms. Our analysis has revealed that the assessment of the behaviour of nodal electricity price volatility is rarely studied in the literature. This fact has motivated the exploration of this topic and the consideration of the New Zealand electricity market case. The New Zealand electricity market is an energy-only system with no interconnections with other electricity markets. Furthermore, it has plenty of electricity produced from hydropower, which has a high potential to reduce price volatility through its backup role. The nodal pricing mechanism is complex, and data on it are hard to process. This paper elucidates the main challenges in processing electricity big data. Three different procedures to make this data more useable are described in detail. The main conclusions of this paper highlight the need to access easy-to-manage data and identify certain variables that significantly affect nodal prices for data which are unavailable. Full article

Sales forecasting is a crucial aspect of any successful manufacturing organisation as it provides the foundation for investment, employment development, and innovation. The Global Financial Crisis (GFC) had a negative impact on the manufacturing sector in South Africa (SA) and the rest of the world. The objective of this paper is to analyse the trend of manufacturing sales before, during, and after the GFC and to quantify the impact of the GFC on the total manufacturing sales in SA. The time-series-based Box–Jenkins methodology is used to achieve the objective. The study used Statistic South Africa’s data on monthly total manufacturing sales in SA from January 1998 to December 2022. Total manufacturing sales exhibit strong seasonality. The ACF, PACF, and EACF plots, as well as the AIC, BIC, RMSE, and MAE, suggest the SARIMA(2,1,2)(2,1,1)₁₂ model as the best model for explaining and forecasting manufacturing sales in SA. The SA manufacturing sector was negatively impacted by the GFC, as evidenced by the comparison between actual data and projections based on a historical path prior to the GFC. Manufacturing sales are recovering from the GFC but have not reached potential levels that could have been achieved without the crisis. The SA manufacturing sector may take time to reach the expected/projected sale levels that could have been achieved in the absence of the GFC. Full article

Finance support and other forms of business support have been recognized as key factors in the entrepreneurial ecosystem in theoretical and empirical investigations. There is currently a knowledge gap regarding the combined impact of these two variables on the entrepreneurial ecosystem, even though much research has shown that both variables have a favorable influence on entrepreneurial ecosystems. The primary goal of this study is to determine whether the interactions between the two variables—finance support and other business support services—have an impact on the entrepreneurial ecosystem in South Africa. A second objective is to determine the main effects of these variables on the entrepreneurial ecosystem. A standardized questionnaire was used to conduct a study of 2000 SMEs in the South African province of Mpumalanga. To investigate the effects of business support services and finance on the ecosystem as measured by the test instruments, a two-way between-groups analysis of variance was carried out. Depending on their finance index, subjects were classified into three groups: low, medium, and high. There was a statistically significant main effect for finance and other business support services with F(2, 1478) = 26.109, p ≤ 0.001 and F(2, 1478) = 149.552, p ≤ 0.001 respectively. However, the effect sizes were small (partial eta squared = 0.034 and 0.168). Post hoc comparisons using the Tukey HSD test indicated that the mean scores differed for all the groups in finance support and other business support services. It was found that financial support and other business support would impact the SME ecosystem in South Africa positively if implemented separately but not if implemented interactively. The targets of financial support should be separated from other business support during policy formulation and implementation by the government. Full article

The Fourth Industrial Revolution (IR4) and the COVID-19 pandemic have become triggers for micro, small, and medium enterprises (MSMEs) to conduct digital transformation even though there are many problems that need to be resolved, particularly those related to the readiness of MSMEs in facing digitalization. This study aims to investigate Indonesian MSMEs and identify problems and types of knowledge transfer activities. By involving 101 MSMEs selected using convenience sampling and collected through an online survey, the hypotheses testing shows that the perception of higher drivers for IR4 promoting IR4 readiness is supported, while the perception of higher barriers to IR4 decreasing IR4 readiness is not supported. The problems faced by MSMEs in Indonesia are related to financial, human resources, marketing, operational, administrative, and organizational management. To solve these problems and enhance the readiness for digitalization, knowledge transfer activities from universities to MSMEs are needed. This study provides a theoretical contribution to the strategic management literature to fill the lack of studies on MSMEs’ e-readiness in developing countries and a practical contribution to assist decision-makers in formulating strategies to support MSMEs in facing IR4 and solving internal problems through knowledge transfer activities. Full article

Stock markets serve as a conduit for money and liquidity, which are necessary for economic growth and stability. This study aimed to determine whether stock market impacts are communicated in an economically unstable environment, characterised by volatility, high inflation rates, and political instability. The research used a time series Vector Autoregressive model (VAR) with quarterly data from between 2013 and 2022. The study revealed that there is a positive statistically significant association between the stock market and economic growth at the 10% level. On the other hand, the stock market liquidity has no major influence on Zimbabwe’s economic development. As a result, the study advises policymakers to evaluate the rules regulating the stock market carefully and to relax some of the requirements for firms to be listed on the stock exchange. The stock market will become more liquid as a result of this because it will draw more internal and external businesses to being listed. The ZSE should also develop a framework for the gradual implementation of the commodity derivatives exchange as Zimbabwe’s substantial mineral reserves and robust agriculture may bring significant income to the country’s economy. Full article

Tobacco consumption contributes to a substantial amount of household expenditures, which might lead to decreased spending on other essentials. This study examines household head tobacco expenditures in various inequality settings. In this study, we investigated the impact of gender, race, and educational inequality and the substitution effect of tobacco expenditure on essentials such as children’s education and household food. We looked at how much of the resources household heads spend on tobacco in different inequality settings that replace households’ essentials. The panel setting of the National Income Dynamics Study (NIDS), South Africa’s first nationally representative household panel survey, is used as a data collection source for this study. These are household surveys conducted by the Presidency’s Office of Planning, Monitoring, and Evaluation. The panel data are subject to attrition in longitudinal research. We compared the conditional expenditure shares of various types of households using econometric models such as moment quantile regression. A negative and statistically significant estimated coefficient of tobacco expenditure and the coefficient of the interacted term (inequality and tobacco expenditure) demonstrated the substitution effect. The findings reveal that low-income households whose heads smoke tobacco invest less in their children’s education, while well-educated heads of high-income households’ place as much value on their children’s education as they do on cigarette expenditure. The study also points out that the share of income spent on cigarettes by black household heads is negatively connected to their children’s education across all quantiles compared to non-blacks. We conclude that low-income households are more likely to experience the substitution impact than high-income households. This study recommends, among other things, that low-income households should prioritize needs over non-essentials in order to maximize household satisfaction, and government should implement policies that will limit tobacco consumption expenditure. Full article

One way to reduce inequality and poverty is to promote tax justice. In 2021, the government of the state of Rio Grande do Sul, Brazil, implemented a program (the Devolve-ICMS Program) that refunds consumption tax to low-income citizens (cashback). This study aims to evaluate the impacts of this Program using a differences-in-differences model and having, as response variables, the monthly sum of electronic invoices issued to the Program’s beneficiaries, as well as their value. The database used includes all invoices issued to the target population during the 12 months before the Program’s implementation and the 14 months after its implementation, resulting in 7.7 million records. To receive the tax refund, the eligible population must pick up a Citizen Card, made available by the state government, which was done by a significant part of this population. The treatment group is composed of eligible citizens who have the Card, whereas the control group comprises eligible citizens who do not have it. The results show that the Program is effective, as it has reduced tax pressure on poor people and increased both the number of invoices issued and their value. Full article

This paper investigates the threshold of the cyclical adjusted primary balance (CAPB) that can be attributed to fiscal consolidation in South Africa. The CAPB framework is used in the threshold autoregressive regime (TAR) from 1979 to 2022. The contribution of the paper is the estimation of the CAPB in the context of South Africa to find fiscal consolidation episodes. Moreover, we identify the threshold of CAPB that can be attributed to fiscal consolidation, which the available literature is silent on. The TAR, first-order derivative and dummy variables are employed to find thresholds that can be attributed to fiscal consolidation episodes. By doing so, we provide valuable insights into the underlying dynamics of fiscal consolidation in the country, which can help policymakers develop more effective strategies for managing fiscal consolidation episodes. We estimated the success of fiscal consolidation on government debt in South Africa. There is a threshold of −1.28168%, 1.9182%, and 1.9270% for the CAPB of total government revenue increase, government expenditure cut, and the CAPB as a sum of both revenue and expenditure, respectively. These thresholds are different from the threshold of 1.5% advocated in the literature. It is recommended that a country-based threshold be used to find fiscal consolidation episodes. No or less fiscal consolidation is needed, as it results in less chance of reduction in government debt. Fiscal authorities must establish and execute a strategy for managing domestic government debt to avoid increasing its risk. Full article