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An empirical analysis of the determinants of economic growth using cross-country data. It explores the impact of various factors, including trade share, school enrollment, capital stock, political instability, and civil liberties, on the average annual growth rate of real per capita gdp from 1960 to 1995. The analysis is conducted through a series of regression models, and the results are discussed in detail, addressing questions related to the statistical significance, economic interpretation, and policy implications of the findings. Valuable insights into the complex interplay of economic, political, and social factors that shape a country's growth trajectory, making it a relevant resource for students, researchers, and policymakers interested in understanding the drivers of economic development.
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An Empirical Investigation of the Determinants of Economic Growth
In this problem set, you explore the determinants of economic growth using the cross-country data set (growthdata.dta). Table 1 defines the variables used in this problem set follows the questions.
a) Write the regression in column (1) in “equation form,” with the standard error below the respective regression coefficient. b) Explain in words what the coefficient on school60 means in regression (1). c) Using regression (1), test the hypothesis that the coefficient on tradeshr is zero, against the alternative that it is nonzero, at the 5% significance level. In everyday words (not statistical terms), what precisely is the hypothesis that you are testing? d) Does the coefficient on tradeshr differ in regressions (1), (2), and (3) in a substantively important way, that is, is the difference between the three estimates large in a real-world sense?
e) Economic theory predicts that tradeshr , school60 , and capstock60 all are determinants of economic growth. Use regression (2) to test the hypothesis (at the 5% significance level) that the coefficients on these three economic variables are all zero, against the alternative that at least one coefficient is nonzero.
f) Using regression (3), consider the coefficient on revc. Does the sign and magnitude make sense? Explain.
g) Using regression (3), consider the coefficient on civil. Does the sign and magnitude make sense? Explain.
h) In regression (3), is the coefficient on revc statistically significant at the 5% significance level? Is the coefficient on civil statistically significant at the 5% significance level?
i) Use the heteroskedasticity-robust F -statistic to test the hypothesis (at the 1% significance level) that the coefficients on the political variables ( revc and civil ) in regression (3) are both zero, against the alternative that one or the other or both are nonzero. Discuss in light of your answer to part (h).
j) The neoclassical theory of human capital suggests that countries with more human capital – that is, a better educated work force – will have a higher rate of productivity and therefore have a higher growth rate. Is this prediction borne out in the regression results? Explain.
k) Explain why the coefficient on school60 and its standard error are so different in regressions (1) and (2).
l) Using regression (3), estimate the difference in growth rates between a country with 4 years of school and 8 years of school in 1960, holding constant the other variables in regression (3). Also compute a 95% confidence interval for this difference.
Table 2: Growth Regression Results
Dependent variable: Growth
Regressor (1) (2) (3) tradeshare ( ) ( ) ( ) school ( ) ( ) ( ) capstock60 __ ( ) ( ) revc __ __ ( ) civil __ __ ( ) Intercept ( ) ( ) ( ) F - statistics testing the hypothesis that the population coefficients on the indicated regressors are all zero : tradeshare , school ( ) ( ) ( ) tradeshare , school60, capstock60 __ ( ) ( ) revc , civil __ __ ( ) Regression summary statistics
Regression RMSE n
Notes : Heteroskedasticity-robust standard errors are given in parentheses under estimated coefficients, and p -values are given in parentheses under F - statistics. The F -statistics are heteroskedasticity-robust. The regression results exclude data on Malta.