Impact of Employed Labor Force, Investment, and Remittances on Economic Growth in EU Countries

Round 1

Reviewer 1 Report

A better description of the variables and formulas, more detailed would be useful.

Please arrange formulas and tables. Data source is missing under all charts and tables.

 

I propose provide new estimation with using GMM.

I suggest to add new position in references concerning labor market in EU .

Author Response

To the Editor of Sustainability, from the Authors of manuscript Sustainability-986963

November 17, 2020

The authors are grateful to the Academic Editor and reviewers of manuscript number Sustainability-986963 for their thoughtful comments.

All of the comments of the reviewers are taken into consideration and answered, point by point, in this letter. The authors have introduced a labelling into the comments for reference purposes.

The authors believe that the revised version of the paper is better than the originally submitted one. For this reason, they reiterate their gratitude to the anonymous reviewers.

​In paper revision we used the "Track Changes" function in Microsoft Word.

 

Response to Reviewer 1 Comments

1. ”A better description of the variables and formulas, more detailed would be useful.”

• Authors: We considered the suggestion and described in detail the variables and formulas (lines 85-108, 207-212, 227-249).

 

2. “Please arrange formulas and tables. Data source is missing under all charts and tables.”

• Authors: The authors thank the reviewer for the suggestion. We rearranged the formulas and tables in the format specified by the journal. All the tables and figures are own processing of the database, created by taking over the values of the indicators from the World Bank and Eurostat (lines 253-254).

 

3. “I propose provide new estimation with using GMM.

• Authors: The authors thank the reviewer for the very interesting suggestion. In our paper the analysis is done at the level of each country, and the suggested method is applied on the panel. Also, the independent variable is not differentiated in the final model we derived. In a future paper we could expand the research at the panel level using GMM System.

 

4. “I suggest to add new position in references concerning labor market in EU.

• Authors: We acknowledged the suggestion and added 3 new references related to the labor market in the EU (references 5, 6, 7) (lines 734-741).

"European Economic and Social Committee. Labour Market Observatory. Available online: https://www.eesc.europa.eu/ro/sections-other-bodies/observatories/labour-market-observatory (accessed on 10 November 2020).

Campos, N.F.; De Grauwe, P.; Ji, Y. Economic Growth and Structural Reforms in Europe; Cambridge University Press: Cambridge, United Kingdom, 2020; online ISBN: 9781108782517. https://doi.org/10.1017/9781108782517

Eichhorst, W.; Marx, P.; Wehner, C. Labor market reforms in Europe: towards more flexicure labor markets?. Journal for Labour Market Research2017, 51, 3. https://doi.org/10.1186/s12651-017-0231-7"

Concluding Comments by the authors

The authors have considered and commented all the queries raised by the reviewer of their manuscript number Sustainability-986963. Improvements are presented in the new version of the paper. The authors believe that the present version of the paper is better than that originally submitted. For this reason, they reiterate their gratitude to the Reviewer.

Reviewer 2 Report

Dear Authors,

The idea is interesting even if parts of it were approached in other researches as well.

The data you have used are ample and offer a good base for documenting such a broad spectrum. However, since you speak about EU countries why do you choose the dollar expressed measures?

I do not understand why you have chosen to approach the 2020 crisis period, since it is not over yet and probably deserves a separate study. Hence I recommend to limit the study period to 2019, since 2020 it is obviously an "outlier" which has other determinants than the rest of the period.

Also, the period chosen 1996-2019 (2020) is too big to be homogenous and it has at least two separate periods, i.e. before the 2008 crisis and after it. So I suggest dividing the overall period into two sub-periods to better capture the impact of the 2008 global financial crisis.

As you state in the abstract "The paper analyzes the evolution and influence of gross domestic product per capita, labor force participation rate, gross fixed capital formation and personal remittances on economic growth for European Union (EU) countries, using data..." This is why necessary to apply at least a Granger causality test, to check whether and how the relation between your variables works in the opposite direction as well.

Including a lagged dependent variable as a regressor violates strict exogeneity, because the lagged dependent variable is likely to be correlated with the random effects and/or the general errors.

When the exogeneity assumptions are violated and correlation pattern between time varying variables and errors may be complicated, commonly used static panel data techniques such as fixed effects estimators are likely to produce inconsistent estimators because they require certain strict exogeneity assumptions.

I suggest using as least the Arellano Bond method to mitigate this problem.

I also recommend putting at least some of econometric tests' tables into an appendix since it can divert attention from the essence of the research to a string of numbers and percentages.

Also, English should be improved across the entire paper.

I think that after performing recommended suggestions the paper can be considered a proper candidate for publishing in this prestigious journal.

Best regards

Author Response

To the Editor of Sustainability, from the Authors of manuscript Sustainability-986963

November 17, 2020

The authors are grateful to the Academic Editor and reviewers of manuscript number Sustainability-986963 for their thoughtful comments.

All of the comments of the reviewers are taken into consideration and answered, point by point, in this letter. The authors have introduced a labelling into the comments for reference purposes.

The authors believe that the revised version of the paper is better than the originally submitted one. For this reason, they reiterate their gratitude to the anonymous reviewers.

In paper revision we used the "Track Changes" function in Microsoft Word.

Response to Reviewer 2 Comments

General Comments: "The idea is interesting even if parts of it were approached in other researches as well.

I think that after performing recommended suggestions the paper can be considered a proper candidate for publishing in this prestigious journal."

• Authors: The authors are greatly encouraged by the nice opinion concerning the idea of the article.

 

1. “The data you have used are ample and offer a good base for documenting such a broad spectrum. However, since you speak about EU countries why do you choose the dollar expressed measures?"

• Authors: The data for the studied period 1996-2019 were collected from World Bank, thus, the value of GDP per capita is expressed in $.

 

2. “I do not understand why you have chosen to approach the 2020 crisis period, since it is not over yet and probably deserves a separate study. Hence I recommend to limit the study period to 2019, since 2020 it is obviously an "outlier" which has other determinants than the rest of the period.“

• Authors: We approached the comparison of the first 2 quarters of 2020 compared to 2019 in order to highlight the way in which the beginning of the coronavirus crisis affected the evolution of the studied indicators. A subsequent study could extend the research covering the entire period of the COVID crisis.

 

3. “Also, the period chosen 1996-2019 (2020) is too big to be homogenous and it has at least two separate periods, i.e. before the 2008 crisis and after it. So I suggest dividing the overall period into two sub-periods to better capture the impact of the 2008 global financial crisis.“

• Authors: We acknowledge the suggestion and performed the analysis separately for two other periods (1996-2008 and 2009-2019) before and after the financial crisis of 2008. As a result, interesting results were found (lines 260-274, 276-285, 308-324, 329-358, 369-379, 400-411, 423-434, 454-465, 489-495, 497-501, 510-523, 583-Table 10, 584-Table 11, 585-644).

  

4. “As you state in the abstract "The paper analyzes the evolution and influence of gross domestic product per capita, labor force participation rate, gross fixed capital formation and personal remittances on economic growth for European Union (EU) countries, using data..." This is why necessary to apply at least a Granger causality test, to check whether and how the relation between your variables works in the opposite direction as well.“

• Authors: The authors thank the reviewer for this suggestion. We have included Granger causality in the paper (lines 241-243, 557-576).

 

5. “Including a lagged dependent variable as a regressor violates strict exogeneity, because the lagged dependent variable is likely to be correlated with the random effects and/or the general errors.

When the exogeneity assumptions are violated and correlation pattern between time varying variables and errors may be complicated, commonly used static panel data techniques such as fixed effects estimators are likely to produce inconsistent estimators because they require certain strict exogeneity assumptions.

I suggest using as least the Arellano Bond method to mitigate this problem.“

• Authors: The authors thank the reviewer for this suggestion. The GMM (Arellano Bond) estimation technique involves a dynamic regression model that is applied at the panel level, and our study considers the analysis at the level of each country, and not at the panel level. In a future paper we could expand the research at the panel level using GMM System

 

6. “I also recommend putting at least some of econometric tests' tables into an appendix since it can divert attention from the essence of the research to a string of numbers and percentages.“

• Authors: We acknowledge the suggestion, we regrouped the information by submitting the statistical tables in the Appendix (lines 711-721).

 

7. “Also, English should be improved across the entire paper.“

• Authors: We have re-read the whole paper and carefully corrected the English. We hope that the resulting version improves the initial one.

 

Concluding Comments by the authors

The authors have considered and commented all the queries raised by the reviewer of their manuscript number Sustainability-986963. Improvements are presented in the new version of the paper. The authors believe that the present version of the paper is better than that originally submitted. For this reason, they reiterate their gratitude to the Reviewer.

Reviewer 3 Report

1.The purpose of the study is unclear (contradiction between Abstract and Introduction)

Abstract: “the paper analyzes the evolution and influence of gross domestic product per capita,  labor  force participation rate, gross fixed capital formation and personal remittances on economic growth  for European Union (EU) countries”

Introduction: “In this study we continue the research according to which remittances from workers outside the  country of origin become the largest source of foreign financing, thus contributing to the economic  development of the countries of origin, but taking into account another set of indicators”.

2.The study did not bring added value

 “The novelty  of this study is the analysis of the effects of certain indicators: gross domestic product per capita,  growth rate of gross domestic product per capita (annual%), labor force participation rate, total (% of  total population ages 15+), gross fixed capital formation (% of gross domestic product), personal  remittances received (% of gross domestic product), on the development of EU countries”.

3.The conclusions are predictable

-“The analysis of the evolution of the GDP per capita, for the period 1996 - 2019, showed a  significant increase at the level of all states, especially for the emerging ones (Discussions, conclusions and proposals)

-“Obviously, the coronavirus crisis has destroyed many positive certainties in the EU“

-“we can say that the decrease of the employed population and investments are the  main factors that lead to the reduction of the GDP growth rate“.

4.The degree of plagiarism - 9%

 

Author Response

To the Editor of Sustainability, from the Authors of manuscript Sustainability-986963

November 17, 2020

The authors are grateful to the Academic Editor and reviewers of manuscript number Sustainability-986963 for their thoughtful comments.

All of the comments of the reviewers are taken into consideration and answered, point by point, in this letter. The authors have introduced a labelling into the comments for reference purposes.

The authors believe that the revised version of the paper is better than the originally submitted one. For this reason, they reiterate their gratitude to the anonymous reviewers.

In paper revision we used the "Track Changes" function in Microsoft Word.

Response to Reviewer 3 Comments

1. “The purpose of the study is unclear (contradiction between Abstract and Introduction)

Abstract: “the paper analyzes the evolution and influence of gross domestic product per capita, labor force participation rate, gross fixed capital formation and personal remittances on economic growth for European Union (EU) countries”

Introduction: “In this study we continue the research according to which remittances from workers outside the  country of origin become the largest source of foreign financing, thus contributing to the economic  development of the countries of origin, but taking into account another set of indicators”. “

• Authors: Thanks you for the comments. We read and modified the introduction by clearly establishing the objective pursued. At this point, there are no more contradictions between the abstract and the introduction (lines 14-26, 85-88).

 

2. “The study did not bring added value

“The novelty of this study is the analysis of the effects of certain indicators: gross domestic product per capita, growth rate of gross domestic product per capita (annual%), labor force participation rate, total (% of total population ages 15+), gross fixed capital formation (% of gross domestic product), personal remittances received (% of gross domestic product), on the development of EU countries”. ”

• Authors: We acknowledged the suggestion, and we emphasized the importance of studying the (lines 162-193).

 

3. “ The conclusions are predictable

-“The analysis of the evolution of the GDP per capita, for the period 1996 - 2019, showed a  significant increase at the level of all states, especially for the emerging ones (Discussions, conclusions and proposals)

-“Obviously, the coronavirus crisis has destroyed many positive certainties in the EU“

-“we can say that the decrease of the employed population and investments are the  main factors that lead to the reduction of the GDP growth rate“.“

• Authors: We took into account the opinion and the conclusions were reformulated (lines 613-704).

 

4. “The degree of plagiarism - 9%.“

• Authors: We took into account the observation and we hope that through the changes made we have solved this aspect.

 

Concluding Comments by the authors

The authors have considered and commented all the queries raised by the reviewer of their manuscript number Sustainability-986963. Improvements are presented in the new version of the paper. The authors believe that the present version of the paper is better than that originally submitted. For this reason, they reiterate their gratitude to the Reviewer.

Reviewer 4 Report

According to the title of the manuscript, readers will expect that the primary research question of the manuscript  is to investigate the impact of employed labor force, investment, and remittances on economic growth in EU countries. The answer to this research question in the manuscript is summarized in one sentence in Abstract as follows; "The used model shows that the significant positive influence of labor and investment and the minor effect of remittances on economic growth." Unfortunately, the contribution of the current version is too marginal to be published in Sustainability. 

1. Given that the research question requires a quantitative approach, the hypothesis test that the manuscript adopts may not be enough for scientific research. Can you precisely quantify to what extent each factor boosts up economic growth?
2. The manuscript relies on descriptive analyses without any causal analysis. In other words, it focuses on estimating a linear trend line and it fails in examining underlying driving forces. Can you identify driving forces using another econometric tools such as IV?
3. It is not clear whether all indicators in early 2020 were adversely affected due to the domestic Covid19 shock or due to the negative influence from neighboring countries.  

Author Response

To the Editor of Sustainability, from the Authors of manuscript Sustainability-986963

November 17, 2020

The authors are grateful to the Academic Editor and reviewers of manuscript number Sustainability-986963 for their thoughtful comments.

All of the comments of the reviewers are taken into consideration and answered, point by point, in this letter. The authors have introduced a labelling into the comments for reference purposes.

The authors believe that the revised version of the paper is better than the originally submitted one. For this reason, they reiterate their gratitude to the anonymous reviewers.

In paper revision we used the "Track Changes" function in Microsoft Word.

General Comments: "According to the title of the manuscript, readers will expect that the primary research question of the manuscript is to investigate the impact of employed labor force, investment, and remittances on economic growth in EU countries. The answer to this research question in the manuscript is summarized in one sentence in Abstract as follows; "The used model shows that the significant positive influence of labor and investment and the minor effect of remittances on economic growth." Unfortunately, the contribution of the current version is too marginal to be published in Sustainability."

• Authors: The authors took into account the opinion of the reviewer, as a result they clearly formulated the objectives pursued in the paper (lines 85-88, 162-184) and extended the analysis.

Response to Reviewer 4 Comments

 

1. “Given that the research question requires a quantitative approach, the hypothesis test that the manuscript adopts may not be enough for scientific research. Can you precisely quantify to what extent each factor boosts up economic growth?“

• Authors: The authors consider that the answer to this question could be the application of a dynamic GMM model, as among the important factors of the economic growth rate are also qualitative factors whose influence cannot be reflected by the econometric model. However, in this study the analysis is performed at the level of each country, and the GMM model is applied only at the panel level.

 

2. “The manuscript relies on descriptive analyses without any causal analysis. In other words, it focuses on estimating a linear trend line and it fails in examining underlying driving forces. Can you identify driving forces using another econometric tools such as IV?”

• Authors: Thank you for the suggestion, we included the Granger causality (lines 241-243, 557-576).

 

3. “It is not clear whether all indicators in early 2020 were adversely affected due to the domestic Covid19 shock or due to the negative influence from neighboring countries.“ 

• Authors: The authors consider that it is still premature to be able to quantify the effect of the COVID crisis on every factor of economic and social life.

  

Concluding Comments by the authors

The authors have considered and commented all the queries raised by the reviewer of their manuscript number Sustainability-986963. Improvements are presented in the new version of the paper. The authors believe that the present version of the paper is better than that originally submitted. For this reason, they reiterate their gratitude to the Reviewer.

Round 2

Reviewer 2 Report

Dear Authors,

You have responded to many of my suggestions and recommendations. That should make the paper a better candidate for publication.

However, you still produce some claims that contradict economic common sense...

At rows 276-278 you mention: "The most pronounced decreases in 2009 compared to 2008 were in Ir, It, Dk, Be, Lu, and Es. Ro and Hu experienced economic growth, which means that the effects of the economic crisis appeared later in these countries". 

It is common sense that Romania and Hungary experienced negative economic growth in 2009. The only notable exception was Poland, which managed to register economic growth during the global crisis which started in 2008. Hence I suggest a review of all the economic statements included in the paper.

Also, I do not see the relevance, when you study growth rate evolution, of determining their relative evolution (percentage delta) from one year to another, as in table 1. It is not only not relevant, but it can also lead to confusing conclusions, such as the one from rows 268-270 when you mention that Hungary and Luxembourg growth rate increase 1700 times (!).

I would not insist that much in analyzing the growth rate in itself...Because when you start from 0.01% and you go to 1,7% it offers a "sensational increase", but it is due only the base effect...I would recommend a significant reduction in growth rate evolution's analysis, considering your article has already reached 38 pages...which makes it difficult to follow...

Overall, I recommend a reduction in paper size paper to make it more readable and more appealing to readers.

English should be reconsidered all across the paper...Some sentences are too long so they would probably be better split into two parts or reformulated...

"For the 1996-2019 interval, the statistical analysis of the indicator shows a homogeneous distribution of the labor force participation rate over the studied period, the indicator does not show extreme variations neither at the EU level nor at individual level. The average labor force participation rate also shows that most countries (18) have a higher average than the EU average, Sweden has the highest value (66.28%) and Italy has the lowest value (48.79%)."

After you address these observations I think the paper can be considered for publication.

Best regards

 

 

 

Author Response

To the Editor of Sustainability, from the Authors of manuscript Sustainability-986963

November 27, 2020

The authors are grateful to the Academic Editor and reviewers of manuscript number Sustainability-986963 for their thoughtful comments.

All of the comments of the reviewer are taken into consideration.

In paper revision we used the "Track Changes" function in Microsoft Word.

Response to Reviewer 2

We took into account your suggestions and reformulated the analysis part referring to growth rate of GDP. In addition, we restructured the statistical analysis part of all indicators and we eliminated several tables. Thus, the paper size decreased considerably.

We have re-read the whole paper, corrected the English, reformulated some sentences, and we split others. We hope that the resulting version improves the initial one.  

The authors have considered and commented all the queries raised by the reviewer of their manuscript number Sustainability-986963. Improvements are presented in the new version of the paper. The authors believe that the present version of the paper is better than that previous submitted.

For this reason, they reiterate their gratitude to the Reviewer.

Reviewer 3 Report

The authors modified the introduction by clearly establishing the objective pursued. They emphasized the importance of study. 

The present version is better than the originally submitted.

Author Response

To the Editor of Sustainability, from the Authors of manuscript Sustainability-986963

November 27, 2020

The authors are grateful to the Academic Editor and reviewers of manuscript number Sustainability-986963 for their thoughtful comments that conducted of improvement of the paper.

For this reason, they reiterate their gratitude to the Reviewer.

Reviewer 4 Report

The updated version is much better than the original version.

Author Response

To the Editor of Sustainability, from the Authors of manuscript Sustainability-986963

November 27, 2020

The authors are grateful to the Academic Editor and reviewers of manuscript number Sustainability-986963 for their thoughtful comments that conducted of improvement of the paper.

For this reason, they reiterate their gratitude to the Reviewer.