Economic and Social Determinants of Growth in G7 Countries: A Systematic Diagnostic Application of Panel Data Methods
DOI:
https://doi.org/10.55578/jift.2608.010Keywords:
G7 Economies, Panel Data Diagnostics, Macroeconomic Determinants, Hausman Test, Random EffectsAbstract
Understanding the drivers of economic performance in advanced economies remains critical for sustainable policy formulation. This study investigates the roles of key economic (government expenditure) and social (population, internet penetration) determinants of GDP growth across G7 nations, where existing literature shows inconsistent methodological approaches to panel data analysis. We address this gap by systematically applying the standard diagnostic protocol of panel data econometrics to validate model assumptions before estimation. Using balanced panel data covering seven countries over 1975–2024, we employ unit root tests (LLC, IPS, ADF) to verify stationarity and conduct correlation/VIF analyses to check multicollinearity. Revision-stage data verification identified a single erroneous observation in the gross national income (GNI) series; after correction, GNI exhibited a near-unity correlation with GDP (r = 0.94), empirically confirming its conceptual circularity with GDP in advanced economies and it was accordingly excluded from the final specification. The Hausman specification test (χ² = 0.847, p = 0.838) and the Breusch–Pagan Lagrange multiplier test (p = 0.131) jointly indicate that country-specific effects are not systematic, supporting the Random Effects framework over the fixed-effects default common in advanced-economy studies. Government expenditure is positively associated with GDP growth (β = 0.171, p < 0.01), while internet usage displays a negative and significant association (β = -0.011, p < 0.01), consistent with diminishing returns to digital adoption at high penetration levels. Robustness checks with Driscoll–Kraay standard errors confirm the internet-usage result, whereas the fiscal-expenditure effect is attenuated under cross-sectionally robust inference. The study contributes a systematic application and demonstration of rigorous pre-estimation diagnostics in macroeconomic panel analysis and provides country-differentiated policy insights into fiscal coordination, digital governance and demographic management. Future research could extend this protocol to dynamic panel models incorporating non-stationary variables.
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Copyright (c) 2026 Mousumi Akter, Hero Rana Barua Mito, Md Shahriar Kabir Sajib, Ahnaf Aiman Abdi, Anik Barua, Ruma Bardhan, Pranta Barua (Author)
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