Panel unit root test – ADF-Fisher and IPS test results
| Test | At level | At first difference | Conclusion | ||||||
|---|---|---|---|---|---|---|---|---|---|
| IPS | ADF-Fisher | IPS | ADF-Fisher | ||||||
| Series | Statistic | p-value | Statistic | p-value | Statistic | p-value | Statistic | p-value | |
| Y | –3.2188 | 0.0006 | 33.7254 | 0.0007 | –5.7724 | 0.0000 | 51.1866 | 0.0000 | I(0) |
| C | 0.2640 | 0.6041 | 13.4674 | 0.3360 | –2.8261 | 0.0024 | 30.1813 | 0.0026 | I(1) |
| P1 | –0.2628 | 0.3964 | 11.8564 | 0.4573 | –3.7516 | 0.0001 | 36.1439 | 0.0003 | I(1) |
| P2 | 0.8100 | 0.7910 | 8.5394 | 0.7417 | –1.7530 | 0.0398 | 20.2433 | 0.0626 | I(1) |
| P3 | –0.5606 | 0.2875 | 13.7125 | 0.3194 | –3.4617 | 0.0003 | 33.5602 | 0.0008 | I(1) |
| E1 | –2.0071 | 0.0224 | 23.5636 | 0.0233 | –3.4380 | 0.0003 | 33.1822 | 0.0009 | I(0) |
| E2 | –0.0757 | 0.4698 | 12.2365 | 0.4269 | –3.3064 | 0.0005 | 32.2126 | 0.0013 | I(1) |
| E3 | –0.6477 | 0.2586 | 15.9307 | 0.1944 | –5.1493 | 0.0000 | 46.9509 | 0.0000 | I(1) |
| S1 | –1.4906 | 0.0680 | 18.9789 | 0.0890 | –3.2629 | 0.0006 | 32.2248 | 0.0013 | I(0) |
| S2 | –1.6880 | 0.0457 | 21.7573 | 0.0403 | –6.5507 | 0.0000 | 57.0625 | 0.0000 | I(0) |
| S3 | 0.8691 | 0.8076 | 8.2576 | 0.7647 | –1.3329 | 0.0913 | 20.9208 | 0.0516 | I(1) |
| T1 | –1.0899 | 0.1379 | 20.3202 | 0.0613 | –2.4274 | 0.0076 | 28.6091 | 0.0045 | I(1)/I(0) |
| T2 | 1.3170 | 0.9061 | 4.5313 | 0.9718 | –1.6903 | 0.0455 | 22.2144 | 0.0352 | I(1) |
Variable definitions and data sources
| Group | Factor | Code | Description | Source |
|---|---|---|---|---|
| Political | Government spending | P1 | The average total government spending at all levels as a percentage of GDP for the most recent 3 years. | Heritage Foundation |
| Government integrity | P2 | The score for this aspect is calculated by taking the average of scores across three sub-factors of equal weight: 1. Perceptions of corruption, 2. Risk of bribery, and 3. Control of corruption, including “capture” of the state by elites and private interests. | Heritage Foundation | |
| Image abroad or branding | P3 | Survey data collected from mid- and upper-level managers. The respondents were asked to rate their agreement with the statement “The country’s image abroad encourages business development” on a scale of 1 (strongly disagree) to 6 (strongly agree). | IMD | |
| Economic | Tax burden | E1 | Considers three equally weighted sub-factors: 1. The top marginal tax rate on individual income, 2. The top marginal tax rate on corporate income, and 3. The total tax burden as a percentage of GDP. | Heritage Foundation |
| GDP | E2 | GDP in US$ billions. | IMD | |
| Protectionism | E3 | Survey data collected from mid- and upper-level managers. The respondents were asked to rate their agreement with the statement “Government protectionism does not impair the way you conduct business” on a scale of 1 (strongly disagree) to 6 (strongly agree). | IMD | |
| Social | Health infrastructure | S1 | Survey data collected from mid- and upper-level managers. The respondents were asked to rate their agreement with the statement “Health infrastructure meets the needs of society” on a scale of 1 (strongly disagree) to 6 (strongly agree). | IMD |
| Pension funding | S2 | Survey data collected from mid- and upper-level managers. The respondents were asked to rate their agreement with the statement “Pension funding is adequately addressed for the future” on a scale of 1 (strongly disagree) to 6 (strongly agree). | IMD | |
| Gender gap index | S3 | Evaluates gender disparities across four main dimensions: 1. Economic Participation and Opportunity, 2. Educational Attainment, 3. Health and Survival, and 4. Political Empowerment. | World Economic Forum | |
| Technological | Higher education researchers | T1 | The number of researchers in higher education as a percentage of the national total. | OECD |
| Global Innovation Index | T2 | Utilizes a comprehensive dataset comprising 81 indicators sourced from various international public and private sources. It also recognizes the leading 100 science and technology hubs globally. | WIPO |
Pedroni Residual Cointegration Test for political (P), economic (E), social (S), and technological (T) environment models
| Panel statistics | rho-Statistic | PP-Statistic | ADF-Statistic | |||
|---|---|---|---|---|---|---|
| Models | Statistic | p-value | Statistic | p-value | Statistic | p-value |
| P | 1.7554 | 0.9604 | –5.9067 | 0.0000 | –2.9572 | 0.0016 |
| E | 1.0923 | 0.8626 | –6.3956 | 0.0000 | –9.2053 | 0.0000 |
| S | 1.5407 | 0.9383 | –5.3368 | 0.0000 | –4.5224 | 0.0000 |
| T | 1.3998 | 0.9192 | –0.9927 | 0.1604 | –0.2006 | 0.4205 |
Political and economic settings: the long- and short-run results of the Panel ARDL
| Political environment | Economic environment | ||||||
|---|---|---|---|---|---|---|---|
| Variable | Coefficient | t-Statistic | p-value | Variable | Coefficient | t-Statistic | p-value |
| Panel A: Long run equation | |||||||
| P1 | –0.2980 | –13.2177 | 0.0000 | E1 | –0.0846 | –4.1477 | 0.0002 |
| P2 | –0.0317 | –0.9557 | 0.3456 | E2 | 0.0033 | 2.6620 | 0.0115 |
| P3 | –1.6533 | –4.6709 | 0.0000 | E3 | 0.0116 | 0.1360 | 0.8926 |
| Panel B: Short run equation | |||||||
| ECT | –0.8026 | –3.2775 | 0.0023 | ECT | –0.8623 | –4.4294 | 0.0001 |
| D(P1) | 0.3841 | 2.6611 | 0.0116 | D(E1) | –0.2028 | –0.6917 | 0.4936 |
| D(P2) | –0.5059 | –1.0641 | 0.2944 | D(E2) | 0.0169 | 2.0882 | 0.0439 |
| D(P3) | 2.7232 | 0.8423 | 0.4052 | D(E3) | –0.6772 | –1.3344 | 0.1904 |
| C2 | –7.3913 | –0.7277 | 0.4715 | C2 | 0.8338 | 0.2343 | 0.8160 |
| C | 131.7951 | 0.8148 | 0.4206 | C | –14.2001 | –0.3121 | 0.7567 |
Social and technological settings: the long- and short-run results of the Panel ARDL
| Social environment | Technological environment | ||||||
|---|---|---|---|---|---|---|---|
| Variable | Coefficient | t-Statistic | p-value | Variable | Coefficient | t-Statistic | p-value |
| Panel A: Long run equation | |||||||
| S1 | 1.4604 | 1.7587 | 0.0888 | T1 | 0.3711 | 3.5175 | 0.0015 |
| S2 | 0.6294 | 2.4031 | 0.0226 | T2 | –0.0072 | –0.2791 | 0.7822 |
| S3 | 5.4988 | 1.0666 | 0.2947 | ||||
| Panel B: Short run equation | |||||||
| ECT | –1.0465 | –5.3378 | 0.0000 | ECT | –0.5580 | –1.4329 | 0.1630 |
| D(S1) | –1.1831 | –1.2065 | 0.2371 | D(T1) | –0.7753 | –0.6515 | 0.5200 |
| D(S2) | –0.2583 | –0.3143 | 0.7554 | D(T2) | –1.5841 | –1.0323 | 0.3108 |
| D(S3) | 61.4142 | 1.2266 | 0.2295 | ||||
| C2 | –4.7438 | –1.4151 | 0.1673 | C2 | –65.7641 | –0.9297 | 0.3605 |
| C | 48.8363 | 1.0121 | 0.3196 | C | 1013.0590 | 0.9246 | 0.3631 |