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This paper investigates whether democracy plays a mediating role in the relationship between foreign direct investment (FDI) and inequality in Sub-Saharan Africa (SSA).
Abstract
Purpose
This paper investigates whether democracy plays a mediating role in the relationship between foreign direct investment (FDI) and inequality in Sub-Saharan Africa (SSA).
Design/methodology/approach
The empirical analysis is conducted using fixed effects and system GMM (Generalised Method of Moments) on a panel of 38 Sub-Saharan African countries covering the period of 1990–2018.
Findings
The results find that FDI has no direct effect on inequality whereas democracy reduces inequality directly in both the short run and the long run. The sensitivity analyses find that democracy improves equality regardless of the magnitude of FDI, resource endowment or democratic deepening whereas FDI only reduces inequality once a moderate level of democracy has been achieved.
Social implications
The results discussed above thus have four policy implications. First, these results show that although democracy has inequality reducing benefits, SSA is unlikely to significantly reduce inequality unless the region purposefully diversifies its trade and FDI away from natural resources. Second, the region should continue to expand credit access to reduce inequality and attract FDI. Third, policymakers should undertake reforms that will reduce youth inequality. Lastly, the region should focus on long-run democratic reforms rather than on short-run democratization to improve governance and investor confidence.
Originality/value
Although there are existing studies that examine the association between FDI and inequality, FDI and democracy and democracy and inequality, this is the first study to explicitly examine the effect of democracy on the association between FDI and inequality in SSA, and the first study to separately consider the possible varied effects of contemporaneous democratization versus the long-run accumulation of democratic capital. In addition, rather than measure inequality by income alone, this study uses the more appropriate Human Development Index to account for SSA's sociological, education and income disparities.
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Yongseung Han and Myeong Hwan Kim
Faced with contradictory outcomes in empirical studies on the relation between democracy and income inequality, this paper attempts to provide empirical relations between…
Abstract
Purpose
Faced with contradictory outcomes in empirical studies on the relation between democracy and income inequality, this paper attempts to provide empirical relations between democracy and income inequality. In particular, the authors seek to find if any curvilinear relation exists as in the Kuznets hypothesis.
Design/methodology/approach
Given elusiveness in empirical relations, the authors will consider several specifications using different estimation methods such as ordinary least squares (OLS), panel data estimation and performing statistical tests to determine the best specification for the relation between income inequality and democracy. Once the authors choose the specification, then the authors will apply this specification to the different groups of data to find any meaningful implications.
Findings
Using the unbalanced panel of 136 countries spanning from 1980 to 2018, the authors found an inverse U-shaped relation, called a political Kuznets curve – income inequality increases first and then decreases later as more democracy is achieved. By quantifying the curve, the authors find that the direct impact of democracy on income inequality is small and that the incremental impact of democracy on income inequality is smaller in a semi-democracy while relatively larger in a full democracy and autocracy.
Originality/value
From the study’s findings, the following policy implications can be considered. First, any change in income inequality caused by democratization should not be concerning as the impact of democracy on income inequality is measured to be very small. Second, the largest factor reducing income inequality is real GDP per capita. Third, the authors find that an impact of government expenditure on income inequality is also inversely U-shaped.
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Graziella Bonanno, Nadia Fiorino, Giampaolo Garzarelli and Stefania Patrizia Sonia Rossi
The article investigates whether variety of democracy affects the probability to employ public subsidies for credit support by small- and medium-sized enterprises (SMEs) led by…
Abstract
Purpose
The article investigates whether variety of democracy affects the probability to employ public subsidies for credit support by small- and medium-sized enterprises (SMEs) led by female entrepreneurs.
Design/methodology/approach
Building on the literature on democracy and on gender differences, it leverages a large firm- and country-level dataset (SAFE) of 31 democracies in Europe (EU and non-EU) over the 2009–2014 period by using probit models and instrumental variable approaches.
Findings
Results from the different econometric techniques and samples suggest that variety of democracy affects female-led SMEs in using public subsidies for credit support. The evidence is robust to endogeneity concerns.
Research limitations/implications
The empirical evidence presents a time frame limitation. At the same time, SAFE is the only database that supplies information about the gender of firms and public subsidies for credit support, rendering it the only resource that allows the test of the hypothesis proposed. The article therefore offers insights for scholars to revisit our results in future studies that make use of datasets with a longer time span – when they will become available.
Originality/value
To the best of the authors' knowledge, the article is the first to study the effect of democracy on female entrepreneurial behavior in the use of public subsidies for credit support.
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Daniela-Georgeta Beju, Maria-Lenuta Ciupac-Ulici and Vasile Paul Bresfelean
This paper aims to investigate the impact of political stability on corruption by drawing upon a sample encompassing both developed and developing European and Asian countries.
Abstract
Purpose
This paper aims to investigate the impact of political stability on corruption by drawing upon a sample encompassing both developed and developing European and Asian countries.
Design/methodology/approach
The dataset, sourced from the Refinitiv database, spans from July 2014 to May 2022. Panel data techniques, specifically pooled estimation and dynamic panel data [generalized method of moments (GMM)] are employed. The analysis encompasses both fixed and random effects models to capture country-specific cross-sectional effects. To validate our findings, we perform a robustness test by including in the investigation four control variables, namely poverty, type of governance, economic freedom and inflation. To test heterogeneity, the dataset is further divided into two distinct subsamples based on the countries’ locations.
Findings
Empirical findings substantiate that political stability (viewed as the risk of government destabilization) has a positive and significant impact on corruption in all analyzed samples of European and Asian countries, though some differences are observed in various subsamples. When we take into account the control variables, these analysis results are robust.
Research limitations/implications
This research provided a panel data analysis with GMM, while other empirical methodologies could also be used, like the difference-in-difference approach. However, our results should be validated by extending the time and the sample to a worldwide sample and using alternative measures of corruption and political stability. Moreover, our focus was on a linear and unidirectional relationship between the considered variables, but it would be interesting to test in our further research a non-linear and bidirectional correlation between them. Furthermore, we have introduced in the robustness test only four economic variables, but to consolidate our findings, we plan to include socioeconomic and demographic variables in future studies.
Practical implications
These outcomes imply that authorities should be aware of the necessity of implementing anti-corruption policies designed to establish effective agencies and enforcement structures for combating systemic corruption, to improve the political environment and the quality of institutions and to apply coherent economic strategies to accelerate economic growth because higher political stability and sustainable development determine a decrease in levels of corruption.
Social implications
At the microeconomic level, the survival of organizations may be in danger from new types of corruption and money laundering. Therefore, in order to prevent financial harm, the top businesses worldwide should respond to instances of corruption through strengthened supervisory procedures. This calls for the creation of a mechanism inside the code of conduct where correct reporting of suspected situations of corruption would have a prompt procedure to be notified of. To avoid corruption in operational procedures, national plans and policies should be developed by government officials, executives and legislators on a national level, as well as by senior management and the board of directors on an organizational level. This might lower organizations' extra corruption-related expenses, assure economic growth and improve global welfare.
Originality/value
A novel feature of our research resides in its broad examination of a sizable sample of European and Asian countries regarding the nexus between corruption and political stability. The paper also investigates a less explored topic in economic literature, namely the impact of political stability on corruption. Furthermore, the study depicts policy recommendations, outlining effective and reasonable measures aimed at improving the political landscape and combating corruption.
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This paper aims to examine the USA's policy toward Myanmar or Burma, analyzing the bilateral relationship between the two countries from the pre-colonial period to the present…
Abstract
Purpose
This paper aims to examine the USA's policy toward Myanmar or Burma, analyzing the bilateral relationship between the two countries from the pre-colonial period to the present day. It highlights the implications of political shifts in the system of government in Myanmar for the bilateral relationship with the USA, particularly after the 1962 coup and the emergence of rising regional powers like China. The paper also shows how the economic role of Myanmar has increased, leading to more equal relations with the United States of America.
Design/methodology/approach
This paper employs a qualitative research design, analyzing data from both primary and secondary sources. The methodology includes a literature review and document analysis to gain a comprehensive understanding of the USA–Myanmar bilateral relationship. The research also analyzes political and economic developments in Myanmar and the region, placing the USA policy in a broader context.
Findings
The research finds that the USA has been an influential player in Myanmar's politics and economy. However, with Myanmar's integration into the Chinese Belt and Road Initiative and its accession to Association of Southeast Asian Nations (ASEAN), its economic role has become more significant, leading to a more balanced relationship with the USA. The paper also shows that the USA's policy toward Myanmar has undergone significant changes, particularly after the 2011 easing of sanctions by former President Barack Obama.
Originality/value
Although many works have traced the history of USA–Myanmar ties, this study provides a fresh perspective by setting past events against the backdrop of contemporary geopolitical upheavals, therefore highlighting the complex evolution of their bilateral dynamics. The paper contributes to the literature on the USA–Myanmar bilateral relationship by providing a comprehensive analysis of the relationship from a historical perspective. The research also adds to the discussion of the implications of political and economic developments in Myanmar for the bilateral relationship with the USA. The findings of this study have important implications for policymakers and scholars interested in the USA's role in Southeast Asia and its relations with rising regional powers like China.
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The article considers the utility of a pluralist perspective in the context of current debates around UK corporate governance reform. Oxford School pluralism advanced both a…
Abstract
Purpose
The article considers the utility of a pluralist perspective in the context of current debates around UK corporate governance reform. Oxford School pluralism advanced both a description of how industrial relations (IR) operated in practice plus a prescription for how it should operate. Whilst economic conditions are different today, a pluralist framing provides not only a useful way of understanding interests in firm governance (description) but also a solid grounding for a pragmatic reform agenda (prescription).
Design/methodology/approach
Drawing from key texts in the field, the article considers core concepts within pluralist discourse and discusses their relevance to contemporary policy debates.
Findings
The article provides a short outline of recent economic and political developments and considers how a pluralist framing helps explain firm-level interests, challenging the dominant narrative of shareholder primacy. It then asks what policy interventions might flow from this analysis of capital and labour investments, and how feasible they are in the current UK context. This allows a discussion of levels of analysis (evident in materialist theories such as “radical pluralism” and the “disconnected capitalism thesis”). Finally, it reflects briefly on the links between corporate governance and wider patterns of inequality, suggesting the pluralist position is consistent with a Durkheimian sociology focusing on the potential in state-led regulatory interventions to tackle anomie and strengthen social solidarity.
Originality/value
The article brings together literature from what are often treated as relatively discrete areas of enquiry (employment relations and corporate governance) and also considers the public policy implications of these connections.
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Sean Gossel and Misheck Mutize
This study investigates (1) whether democratization drives sovereign credit ratings (SCR) changes (the “democratic advantage”) or whether SCR changes affect democratization, (2…
Abstract
Purpose
This study investigates (1) whether democratization drives sovereign credit ratings (SCR) changes (the “democratic advantage”) or whether SCR changes affect democratization, (2) whether the degree of democratization in sub-Saharan African (SSA) countries affects the associations and (3) whether the associations are significantly affected by resource dependence.
Design/methodology/approach
This study investigates the effects of SCR changes on democracy in 22 SSA countries over the period of 2000–2020 VEC Granger causality/block exogeneity Wald tests, and impulse responses and variance decomposition analyses with Cholesky ordering and Monte Carlo standard errors in a panel VECM framework.
Findings
The full sample impulse responses find that a SCR shock has a long-run detrimental effect on the democracy and political rights but only a short-run positive impact on civil liberties. Among the sub-samples, it is found that the extent of natural resource dependence does not affect the magnitude of SCR shocks on democratization mentioned above but it is found that a SCR shock affects long-run democracy in SSA countries that are relatively more democratic but is more likely to drive democratic deepening in less democratic SSA countries. The full sample variance decompositions further finds that the variance of SCR to a political rights shock outweighs the effects of all the macroeconomic factors, whereas in more diversified SSA countries, the variances of SCR are much greater for democracy and political rights shocks, which suggests that democratization and political rights in diversified SSA economies are severely affected by SCR changes. In the case of the high and low democracy sub-samples, it is found that the variance of SCR in the relatively higher democracy sub-sample is greater than in the low democracy sub-sample.
Social implications
These results have three implications for democratization in SSA. First, the effect of a SCR change is not a democratically agnostic and impacts political rights to a greater extent than civil liberties. Second, SCR changes have the potential to spark a negative cycle in SSA countries whereby a downgrade leads to a deterioration in socio-political stability coupled with increased financial economic constraints that in turn drive further downgrades and macroeconomic hardship. Finally, SCR changes are potentially detrimental for democracy in more democratic SSA countries but democratically supportive in less democratic SSA countries. Thus, SSA countries that are relatively politically sophisticated are more exposed to the effects of SCR changes, whereas less politically sophisticated SSA countries can proactively shape their SCRs by undertaking political reforms.
Originality/value
This study is the first to examine the associations between SCR and democracy in SSA. This is critical literature for the Africa’s scholarly work given that the debate on unfair rating actions and claims of subjective rating methods is ongoing.
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