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# Tarun Singh

1. growth

## Variable | Obs Mean Std. Dev. Min Max

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## Variable | Obs Mean Std. Dev. Min Max

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## 2. Linear regression Number of obs = 65

F( 1, 63) = 12.09

## Prob > F = 0.0009

R-squared = 0.1237

## Root MSE = 1.79

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| Robust

## growth | Coef. Std. Err. t P>|t| [95% Conf. Interval]

-------------+---------------------------------------------------------------------------------

## _cons | .6402653 .4591457 1.39 0.168 -.2772641 1.557795

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## a) The coefficient on tradeshr is 2.306434 meaning as the proportion of GDP

that is trade (exports and imports) increases by one unit the average
annual percentage growth of real per capita GDP increases by 2.306434
units. This value is large since there are more developing countries than
developed countries, and an increase in tradeshr will have a greater effect
on growth in developing countries.
8
6
4
2
0
-2

0 .5 1 1.5 2

## Fitted values growth

b)

c) Yes, since the 95% CI for the slope is from .9809608 to 3.631907 and 0 is
not contained in that range the slope is significantly different from 0 at the
5% significance level.

d) .9809608 to 3.631907

e) The R^2 of the regression is 0.1237. This means that .1237 is the
proportion of the sample variance of growth that can be explained by

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growth | 1.0000

## The correlation coefficient between growth tradeshr is .3517 which when

squared is .1237. The correlation coefficient is the square root of R^2.
g) The RMSE is 1.79. This measures the spread of the distribution of the error
term.

i) Non-Robust

65

0.0041

0.1237

## Total | 230.340057 64 3.5990634 Root MSE = 1.79

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## growth | Coef. Std. Err. t P>|t| [95% Conf. Interval]

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## _cons | .6402653 .4899767 1.31 0.196 -.3388749

1.619405

In the tables above we see that taking away the “robust” option changed
the std. error which also means that the t-values, p-values, and
Confidence Intervals are different as well. The new regression has a higher
Std. Err., lower t value, higher p value, and the confidence interval is
wider.

F( 1, 62) = 3.77

## Prob > F = 0.0567

R-squared = 0.0447

## Root MSE = 1.7894

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| Robust

## growth | Coef. Std. Err. t P>|t| [95% Conf. Interval]

-------------+----------------------------------------------------------------

3.411249

2.028975

## Yes it does make a qualitative difference, because the R^2 decreased

when we removed the outlier meaning that a smaller proportion of the
variance can be explained by the regression compared to the original
regression in part a).

## k) The outlying observation is Malta, an island nation whose economy is

largely dependent upon exports and imports thus the tradeshr has a
greater effect on the average annual real per capita GDP growth
compared to a country which is not an island country. The fact that R^2
went down by removing Malta shows that the data from Malta was
skewing the rest of the regression and therefore Malta should be omitted
from the data.

3. a)

F( 1, 63) = 4.36

## Prob > F = 0.0410

R-squared = 0.1000
Root MSE = 1.814

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| Robust

## growth | Coef. Std. Err. t P>|t| [95% Conf. Interval]

-------------+----------------------------------------------------------------

## The coefficient on lorgdp60 is -1.382122. This means that the countries in

the bottom quartile can expect to have a 1.382122% less growth than the
countries in the other quartiles. This value appears to be large.

b)Since the 95% Confidence Interval does not have 0 in it this means that at
the 5% significance level there appears to be a different mean growth rate for
countries with lorgdp60=0 and countries with lorgdp60=1

## sample average for lorgdp60=0 is 2.28293

The difference of means t-statistic is -2.09 and the p value is .041 meaning
the difference significantly different from 0.

## d) The difference of means t-statistic without robust is -2.65. The t statistic

computed in c) is -2.09 where as this one is -2.65. this difference is in t-
statistic values is due to the non robust regression assuming that the data is
homoskedastic, and due to the robust regression assuming that the data is
heteroskedastic.