You have collected data for 104 countries to address the difficult questions of the determinants for differences in the standard of living among the countries of the world. You recall from your macroeconomics lectures that the neoclassical growth model suggests that output per worker (per capita income) levels are determined by, among others, the saving rate and population growth rate. To test the predictions of this growth model, you run the following regression: RelPersinc 0.339 - 12.894 x n + 1.397 x SK , R2 = 0.621, SER= 0.177 (0.068) (3.177) (0.229) where RelPersInc is GDP per worker relative to the United States, n is the average population growth rate, 1980-1990, and SK is the average investment share of GDP from 1960 to 1990 (remember investment equals saving). Numbers in parentheses are for heteroskedasticity-robust standard errors. a. Calculate the (-statistics and test whether or not each of the population parameters are significantly different from zero. Is the coefficient on variable "n" statistically significantly different from zero? Is the coefficient on variable "SK" statistically significantly different from zero (at the 5% significance level)? b. The overall F-statistic for the regression is 79.11. What is the critical value for the overall F- statistic at the 5% and 1% level? What is your decision on the null hypothesis? (Hint: The "overall F-statistic" tests the joint hypothesis that all the slope coefficients are zero).
You have collected data for 104 countries to address the difficult questions of the determinants for differences in the standard of living among the countries of the world. You recall from your macroeconomics lectures that the neoclassical growth model suggests that output per worker (per capita income) levels are determined by, among others, the saving rate and population growth rate. To test the predictions of this growth model, you run the following regression: RelPersinc 0.339 - 12.894 x n + 1.397 x SK , R2 = 0.621, SER= 0.177 (0.068) (3.177) (0.229) where RelPersInc is GDP per worker relative to the United States, n is the average population growth rate, 1980-1990, and SK is the average investment share of GDP from 1960 to 1990 (remember investment equals saving). Numbers in parentheses are for heteroskedasticity-robust standard errors. a. Calculate the (-statistics and test whether or not each of the population parameters are significantly different from zero. Is the coefficient on variable "n" statistically significantly different from zero? Is the coefficient on variable "SK" statistically significantly different from zero (at the 5% significance level)? b. The overall F-statistic for the regression is 79.11. What is the critical value for the overall F- statistic at the 5% and 1% level? What is your decision on the null hypothesis? (Hint: The "overall F-statistic" tests the joint hypothesis that all the slope coefficients are zero).
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:You have collected data for 104 countries to address the difficult questions of the determinants
for differences in the standard of living among the countries of the world. You recall from your
macroeconomics lectures that the neoclassical growth model suggests that output per worker (per
capita income) levels are determined by, among others, the saving rate and population growth
rate. To test the predictions of this growth model, you run the following regression:
RelPersIne= 0.339 – 12.894 x n +1.397 x SK , R2 = 0.621, SER = 0.177
(0.068) (3.177)
(0.229)
where RelPersInc is GDP per worker relative to the United States, n is the average population
growth rate, 1980-1990, and SK is the average investment share of GDP from 1960 to 1990
(remember investment equals saving). Numbers in parentheses are for heteroskedasticity-robust
standard erTors.
a. Calculate the t-statistics and test whether or not each of the population parameters are
significantly different from zero. Is the coefficient on variable "n" statistically significantly
different from zero? Is the coefficient on variable "SK" statistically significantly different from
zero (at the 5% significance level)?
b. The overall F-statistic for the regression is 79.11. What is the critical value for the overall F-
statistic at the 5% and 1% level? What is your decision on the null hypothesis? (Hint: The
"overall F-statistic" tests the joint hypothesis that all the slope coefficients are zero).
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