Kristin Forbes in her American Economic Review (2000) article investigates the relationshipbetween economic growth and inequality. She uses five yearly data for 45 countries for the timeperiod 1965-1995. In the table below are results of her using four types of panel regressionestimation techniques for the same model, where she estimates the relationship betweeneconomic growth and inequality (measured by the Gini coefficient)EstimationmethodInequalityIncomeMale EducationFemale EducationPPPR²Countries.ObservationsPeriodFixed effects(1)0.0036(0.0015)-0.076(0.020)-0.014(0.031)0.070(0.032)-0.0008(0.0003)0.67451801965-1995*Five-year periodsRandom effects(2)0.0013(0.0006)0.017(0.006)0.047(0.015)-0.038(0.016)-0.0009(0.0002)0.49451801965-1995Chamberlain's77-matrix(3)0.0016(0.0002)-0.027(0.004)0.018(0.010)0.054(0.006)-0.0013(0.0000)451351970-1995Arellano andBond(4)0.0013(0.0006)-0.047(0.008)-0.008(0.022)0.074(0.018)-0.0013(0.0001)451351970-1995Ten-yearperiods:fixed effects(5)0.0013(0.0011)-0.071(0.016)-0.002(0.028)0.031(0.030)-0.0003(0.0003)451121965-19950.71Notes: Dependent variable is average annual per capita growth. Standard errors are in parentheses. R² is the within-R² forfixed effects and the overall-R2 for random effects.* Estimates are virtually identical for the period 1970-1995 (with 135 observations).A) What is the definition of the variable she is trying to explain? In other words, what isthe dependent variable?B) What are the variables which explain the dependent variable? i.e., what are theindependent variables?C) In the table above, which variables are significant in explaining the dependentvariable? How do you deduce this from the table? Use one example to show howyou come to the conclusion of whether a variable is significant or not.D) In regression 5 (the 5th column) Forbes runs the same regression using data forevery 10 year period. What extra information does one obtain by doing this?E) What are the economic interpretations of the results from the regressions in thistable? Write down each one individually in words. Make sure that you are making acomparative analysis of each regression against each other.

In simple terms, regression analysis seeks to find a mathematical equation that best fits the…

Kristin Forbes in her American Economic Review (2000) article investigates the relationship between economic growth and inequality. She uses five yearly data for 45 countries for the time period 1965-1995. In the table below are results of her using four types of panel regression estimation techniques for the same model, where she estimates the relationship between economic growth and inequality (measured by the Gini coefficient) Estimation method Inequality Income Male Education Female Education PPP R² Countries Observations Period Fixed effects (1) 0.0036 (0.0015) -0.076 (0.020) -0.014 (0.031) 0.070 (0.032) -0.0008 (0.0003) 0.67 45 180 1965-1995 Five-year periods Random effects (2) 0.0013 (0.0006) 0.017 (0.006) 0.047 (0.015) -0.038 (0.016) -0.0009 (0.0002) 0.49 45 180 1965-1995 Chamberlain's 7-matrix (3) 0.0016 (0.0002) -0.027 (0.004) 0.018 (0.010) 0.054 (0.006) -0.0013 (0.0000) 45 135 1970-1995. Arellano and Bond (4) 0.0013 (0.0006) -0.047 (0.008) -0.008 (0.022) 0.074 (0.018) -0.0013 (0.0001) 45 135 1970-1995 Ten-year periods: fixed effects (5) 0.0013 (0.0011) -0.071 (0.016) -0.002 (0.028) 0.031 (0.030) -0.0003 (0.0003) 0.71 45 112 1965-1995 Notes: Dependent variable is average annual per capita growth. Standard errors are in parentheses. R² is the within-R² for fixed effects and the overall-R2 for random effects. *Estimates are virtually identical for the period 1970-1995 (with 135 observations). A) What is the definition of the variable she is trying to explain? In other words, what is the dependent variable? B) What are the variables which explain the dependent variable? i.e., what are the independent variables? C) In the table above, which variables are significant in explaining the dependent. variable? How do you deduce this from the table? Use one example to show how you come to the conclusion of whether a variable is significant or not. D) In regression 5 (the 5th column) Forbes runs the same regression using data for every 10 year period. What extra information does one obtain by doing this? E) What are the economic interpretations of the results from the regressions in this table? Write down each one individually in words. Make sure that you are making at comparative analysis of each regression against each other.