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Lab Session Problem Exercise

The document outlines a lab session exercise involving a dataset on average growth rates and trade share for 65 countries from 1960 to 1995. It includes tasks such as constructing scatterplots, running regressions, analyzing outliers like Malta, and interpreting statistical significance and confidence intervals. The exercise aims to explore the relationship between economic growth and trade while considering the influence of various variables.

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sanchari.sen24b
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56 views2 pages

Lab Session Problem Exercise

The document outlines a lab session exercise involving a dataset on average growth rates and trade share for 65 countries from 1960 to 1995. It includes tasks such as constructing scatterplots, running regressions, analyzing outliers like Malta, and interpreting statistical significance and confidence intervals. The exercise aims to explore the relationship between economic growth and trade while considering the influence of various variables.

Uploaded by

sanchari.sen24b
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Lab Session Problem Exercise

Using a dataset on average growth rates from 1960 to 1995 for 65 countries, which includes
various variables potentially influencing growth, investigate the relationship between
economic growth and trade. A detailed description of the variables is attached in the file
Growth_Description.

a. Construct a scatterplot of average annual growth rate (Growth) on the average trade
share (TradeShare). Does there appear to be a relationship between the variables?

b. One country, Malta, has a trade share much larger than the other countries. Find Malta
on the scatterplot. Does Malta look like an outlier?

c. Using all observations, run a regression of Growth on TradeShare. What is the


estimated slope? What is the estimated intercept? Use the regression to predict the
growth rate for a country with a trade share of 0.5 and for another with a trade share
equal to 1.0.

d. Estimate the same regression, excluding the data from Malta. Answer the same
questions in (c).

e. Plot the estimated regression functions from (c) and (d). Using the scatterplot in (a),
explain why the regression function that includes Malta is steeper than the regression
function that excludes Malta.

f. Where is Malta? Why is the Malta trade share so large? Should Malta be included or
excluded from the analysis?

Using the same data set on Growth, but excluding the data for Malta, run a regression of Growth
on TradeShare.

a. Is the estimated regression slope statistically significant? That is, can you reject the null
hypothesis 𝐻! : 𝛽" = 0 vs. a two-sided alternative hypothesis at the 10%, 5%, or 1%
significance level?
b. What is the p-value associated with the coefficient’s t-statistic?

c. Construct a 90% confidence interval for 𝛽" .

d. Construct a table that shows the sample mean, standard deviation, and minimum and
maximum values for the series Growth, TradeShare, YearsSchool, Oil, Rev_Coups,
Assassinations, and RGDP60. Include the appropriate units for all entries.

e. Run a regression of Growth on TradeShare, YearsSchool, Rev_Coups, Assassinations,


and RGDP60. What is the value of the coefficient on Rev_Coups? Interpret the value
of this coefficient. Is it large or small in a real-world sense?

f. Use the regression to predict the average annual growth rate for a country that has
average values for all regressors.
g. Repeat (c) but now assume that the country’s value for TradeShare is one standard
deviation above the mean.

h. Why is Oil omitted from the regression? What would happen if it were included?

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