ASSIGNMENT OF ECONOMETRICS

TOPIC: The Relationship between Economic Growth and

School Enrollment.

BFI 63 – GROUP 4
 CONTENT INDEX

A . PA RT 1:
I. Basic T heory
II. Revie w IV. TE STING FOR THE M OST
1 . Re sea rch 1 E FFICIE NT M ODEL
2 . Re sea rch 2 1 . R AMSEY T EST.
3 . Resea rch ga p A. LI N EA R F UN C T I O N
B. PA RT 2: B. LOGAR I T HM FUNC T I O N
I. Method and d ata C. SEM I LO GAR I T HM FUNC T I O N
D. Q UAD RATI C F UN C T I O N
II. Evalu ate t he functio ns of data
1 . Linea r f u ncti o n.
2 . WH IT E TE ST
A. LI N EA R F UN C T I O N
2. Lo g a r it hm f u ncti o n
B. LOGAR I T HM FUNC T I O N
3 . Se m i Lo g a r it hm f u ncti o n
C. SEM I LO GAR I T HM FUNC T I O N
4. Qua d rati c f u ncti o n
D. Q UAD RATI C F UN C T I O N
III. TE ST OF ECON OMICA L
3 . MOST SELECT ION CRITERIA
ASSUM PTIO NS .
1. L I NE AR FUNC T I O N
4 . IN T ER PR ET E ST IMATION OF
2 . LO GAR I T HM FUNC T I O N T H E MOST EFFICIEN T
3 . S E M I LO GAR I T H M FUNC T I O N
4. Q UAD R AT I C FUNC T I O N
A. PART 1:
I. BASIC THEORY
• INPUT - OUTPUT MODEL

GDPP = f (PRM, SEC, TER)

+ Output: GDPP: Gross Domestic Product Per Capita

+ Input : PRM: Gross School Enrollment Ratio Primary Level (%)

SEC: Gross School Enrollment Ratio Secondary Level (%)
TER: Gross School Enrollment Ratio Tertiary Level (%)
A. PART 1:
II. REVIEW:
• RESEARCH 1:

• Research name: The Relationship between Economic

Growth and School Enrollment Rates: Time Series
Evidence from Turkey.
• Author: Sedat Gumus, Selim Kayhan
• Date: 2012

a) Purpose of research: to explore the relationship between

economic growth and educational attainment in Turkey
b) Method: The variables of GDP per capita and gross school
enrollment ratios at the primary, secondary, and tertiary levels.
c) Sample size: in Turkey
d) Model:
e) Result and discussion:
- There is a closer relationship between educational attainment
and economic growth at the primary school level as compared to
the secondary and higher levels of education.
A. PART 1:
II. REVIEW:
2. RESEARCH 2:

• Research name: The Influence of Education on Economic Growth

• Author: ŞTEFAN CRISTIAN CIUCU, RALUCA DRAGOESCU
• Date: May 2014

a) Purpose of research: to analyze the effect of education on economic growth in Bulgaria and Czech Republic, during the transition
period and to compare it to the situation in a developed country the Netherlands.
b) Method: the multiple regression model
c) Sample size: in all three countries (Bulgaria, Czech Republic and the Netherlands)
d) Model:

e) Result and discussion:

-- The most important thing to be taken into consideration is that education quantity has an effect on economic growth after
some years. The graduates have to start their career in order to affect the economy of a country. For this reason a time lag
will be introduced in the model. The time lag for primary education will be set to 10 years and the time lag for secondary
education to 5 years
- Education has an influence on economic growth in both transition and developed countries. The level of influence varies
and depends on other factors from country to country.
 a) Observation b) Research purpose:
• Research 1: 1 country: Turkey --> quite small
• Research 1: The study has some limitations. In
• Research 2: focus on 3 countries Bulgaria, Czech
Turkey, there have been some significant
Republic and the Netherlands
policy changes in both the economic and
---> Quite small also
educational sectors. These policy changes, as
• Our research: includes 142 countries in different
well as international economic trends, may
continents
have impacted both economic growth and
school enrollment patterns. The data does not

3. Research gap: make it possible to take factors

• Reasearch 2: The study has limitation too. The

few data are used so the results not too much
c) Methodology: convincing.

• Research 1:used Toda-Yamamoto’s (1995) causality test. It is the

modified Wald (MWALD) test developed by Toda and Yamamoto
• Research 2: regression model.
• Our research: OLS method
B. PART 2: I II
METHOD AND DATA EVALUATE THE
FUNCTIONS OF DATA

III IV
TEST OF TESTING FOR THE MOST
ECONOMICAL EFFICIENT MODEL
ASSUMPTIONS
 I. METHOD & DATA

1. Method: OLS method

2. Data: The data is available online on World Development Indicators (WDI)

website – the World Bank's premier compilation of cross-country comparable data
on development.
II. EVALUATE THE FUNCTIONS OF DATA

1 L IN EA R FU NC TION

2 L OGAR ITH M FUNCT ION

3 SE MI L OG ARITH M FUNC TION

4 QU ADR AT IC FUNT IO N
 INTE R PRE T ESTIMAT ION RE SULT S
1. LINEAR FUNCTION
• 𝛽0 = -1914.25600286 ---> when other independent
variables equal 0, GDPP will equal to -
1914.25600286 USD on average.
GDPP = 𝛽 0 + 𝛽 1P RM + 𝛽 2SE C + 𝛽 3T ER + 𝑢
• 𝛽1 = -247.677037229 ---> when gross school
From the EViews result in table 2.1 (APPENDIX), we have a enrollment primary level changes by 1%, GDPP will
new linear function: decrease by 247.677037229 USD on average (other
remain constant).
GDPP = -1914.25600286 - 247.677037229*PRM + 502.349750612*SEC +
(23269.39) (223.6879) (113.1806)
20.0977613077*TER + 𝑢 • 𝛽2 = 502.349750612 ---> when gross school
(107.5432) enrollment secondary level changes by 1%, GDPP will
increase by 502.349750612 USD on average (other
n = 142, R2 = 0.312214, SSR = 5.84E+10 remain constant).

• 𝛽3 = 20.0977613077 ---> when gross school

enrollment tertiary level changes by 1%, GDPP will
increase by 20.0977613077 USD on average (other
remain constant).
2. LOGARITHM FUNCTION

LOG(GDPP) = 𝛽 0 + 𝛽 1L OG( PRM) + 𝛽 2LOG(S EC) + 𝛽 3LOG(TER)+ 𝑢

From the EViews result in table 2.2 (APPENDIX), we have a new linear functi on:

LOG(GDPP) = 11.991738184 - 3.1631547027*LOG(PRM) + 2.25339743724*LOG(SEC) + 0.470434628864*LOG(TER) + 𝑢

(3.836473) (0.869451) (0.402793) (0.172883)

n = 142, R2 = 0.329034, SSR = 5.70E+10

3. SEMI LOGARITHM Interpret estimation results
FUNCTION
• 𝛽0 = 8.222 ---> when other independent variables
equal 0, GDPP will equal to 8.222 USD on average.

LOG (GDPP) = 𝛽0 + 𝛽1PRM + 𝛽2SEC + 𝛽3TER+ 𝑢 • 𝛽1 = -0.0257 ---> when gross school enrollment
primary level changes by 1%, GDPP will decrease by
From the EViews result in table 2.3 (APPENDIX), we have a 2.57% on average (other remain constant).
new linear function:
• 𝛽2 = 0.0327 ---> when gross school enrollment
LOG(GDPP) = 8.2224560203 - 0.0257129079552*PRM + secondary level changes by 1%, GDPP will increase by
(0.815861) (0.007843) 3.27% on average (other remain constant).
0.0327100528963*SEC + 0.0113444825181*TER + 𝑢
(0.003968) (0.003771) • 𝛽3 = 0.0113 ---> when gross school enrollment
tertiary level changes by 1%, GDPP will increase by
1.13% on average (other remain constant).

n = 142,R2 = 0.329034, SSR = 5.70E+10

 Interpret estimation results
4. QUADRATIC FUNCTION • 𝛽0 = 16942.0173004 ---> when other independent variables
equal 0, GDPP will equal to 16942.0173004 USD on average.

• 𝛽1 = -209.649882769 ---> when gross school enrollment

GDPP = 𝛽0 + 𝛽1PRM + 𝛽2SEC + 𝛽3SEC2 + 𝛽4TER+ 𝑢 primary level changes by 1%, GDPP will decrease by
209.649882769 USD on average (other remain constant).

From the EViews result in table 2.4 (APPENDIX), we have a new linear • 𝛽2 = -82.505590253 ---> when gross school enrollment
function: secondary level changes by 1%, GDPP will decrease first by
82.505590253 USD on average.
GDPP = 16942.0173004 - 209.649882769*PRM - 82.505590253*SEC +
(25211.23) (222.6880) (334.9384) • 𝛽3 = 3.26898451751 ---> when gross school enrollment
3.26898451751*(SEC)^2 + 43.4247617404*TER secondary level changes by 1%^2units, GDPP will increase by
(1.763946) (107.3475) 3.26898451751 USD on average (other remain constant).

• 𝛽4 = 43.4247617404 ---> when gross school enrollment

n = 142, R2 = 0.329034, SSR = 5.70E+10 tertiary level changes by 1%, GDPP will increase by
43.4247617404 USD on average (other remain constant).
 III. Test of economical
assumptions

LINEAR FUNCTION

LOGARITHM FUNCTION

SEMI LOGARITHM FUNCTION

WE CAN CHOOSE
QUADRATIC FUNCTION
LINEAR FUNCTION LOGARITHM FUNCTION
SEMI LOGARITHM FUNCTION QUADRATIC FUNCTION
 2.WHITE TEST
1.RAMSEY TEST

Test i ng for t he m ost

effi ci ent m odel

3.MOST SELECTION 4.INTERPRET

CRITERIA ESTIMATION OF THE
MOST EFFICENT
TESTING FOR THE MOST EFFICIENT MODEL

RAMSEY TEST
Following results, we want to know whether
our models are unbiased or not, therefore, we
use Ramsey RESET test with 1 fitted values

WHITE TEST
Following results, we want to know whether the
variance of the errors in a regression model is
constant or not, therefore, we use WHITE test.
 LINEAR
FUNCTION
RAMSEY TEST WHITE TEST
 SEMI LOGARITHM
FUNCTION
RAMSEY TEST WHITE TEST
 QUADRATIC
FUNCTION
RAMSEY TEST WHITE TEST
 THREE

III.MOST
SELECTION
CRITERIA
IV.INTERPRET
ESTIMATION
OF THE MOST
EFFICENT
 COMMUNICATION

In this study, we tested and compared 3 models:

(1) Linear function:
GDPP = 𝛽0 + 𝛽1PRM + 𝛽2SEC + 𝛽3TER+ 𝑢
(3) Semi logarithm function:
LOG (GDPP) = 𝛽0 + 𝛽1PRM + 𝛽2SEC + 𝛽3TER+ 𝑢
(4) Quadratic function:
GDPP = 𝛽0 + 𝛽1PRM + 𝛽2SEC + 𝛽3SEC2 + 𝛽4TER+ 𝑢
to find the most efficient model to evaluate variables that
influence economic growth.

As a result, if in future the school enrollment ratio tertiary

Goals increase, the GDPP tends to increase because they both
have positive relationship.
THANK YOU

BFI 63 – GROUP 4