Econometrics - Speech or Presentation Example

The coefficient estimate (β2 = 0.37) suggests that there will be 37% increase in growth if the geographical location of a nation goes up by at least one units. Negative coefficients such as β3 being -0.62 suggest a decrease in growth by 62% if we increase countries residing in Asia to the model by 1 unit. On a similar note, β4 of -1.00 suggests a decrease in growth by 100% if we increase the number of countries residing in Africa by one unit. Finally, and β5 of -0.25 suggests that there will be a decrease, of up to 25%, income per capita if we increase countries residing in other parts of the world.

The current model, as it is in the equation, cannot bring out the different effect on income per capita that is brought about by variable DAfrica,i and DOther,i. this because the independent variables DAsia, and Dother, will automatically be correlated as Asia is part of the rest of the world. Therefore, we will have two variable that describe a similar effect on growth. A fall by up to 62 percent is realized as a result of a decline of one unit on the income per capita of the Asian countries.

Conversely, the income per capita will decline by up to 100 percent if there is an increase of a single unit on the countries in Africa. Intrinsically, there is a foresighted mean drop on the income per capita of 48 percent in the two continents. Adopting raw score instead of absolute score will cause the estimate of Lati smaller than that of Ri. This is from the fact that the two independent variables employing dissimilar measuring units. There will be a reduction of the second model for the R2 and standard error.

and that heteroscedasticity was a concern in model 1 in table 1, then model 1 would not have a constant error variance. As such, to test whether heteroscedasticity is present in model 1 (table 1) or not, the test hypothesis would be such