Describe each of the gauss markov assumptions

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Reference no: EM133407209

Question: This is an individual assignment where you must work alone. Show your calculations (if any) as well as answering the questions in clear full sentences. Log referrers to natural logarithm!

Use the dataset: WDI_2310.RData

Use R to run a cross sectional regression onGDP per capitafor the listed countries as follows:

Ln(GDPpc) = β₀ + β₁ ln(Conspc) + β₂ Trade + β₃Alco + β₄Popgr + u

The variables are defined as follows:

GDPpc = GDP per capita, PPP (current international $)
Conspc= Households and NPISHs final consumption expenditure per capita (constant 2015 US$) [NE.CON.PRVT.PC.KD]
Trade=Trade (% of GDP) [NE.TRD.GNFS.ZS]
Alco = Total alcohol consumption per capita (liters of pure alcohol, 15+ years of age) [SH.ALC.PCAP.LI]
Popgr=Population growth (annual %) [SP.POP.GROW]

You will have to take the natural log of GDPpc and Consumption per capita yourself using R!

Present your regression results in a table below (R output):

Interpret the constant and its p-value.

Interpret the coefficient on household and NPISH consumptionand its p-value.

Interpret the coefficient on trade and its p-value. Hint: Use a large change for trade, such as a "10% point" change for example.

Interpret the coefficient on alcohol consumptionand carry out (meaning: calculate with the official formula) a t-test to determine the significance of the coefficient.

Interpret the R₂ of the regression.

Run the regression in Q1 with an additional independent variable, the quadratic form of "Popgr".

Ln(GDPpc) = β₀ + β₁ ln(Conspc) + β₂ Trade + β₃ Alco + β₄ Popgr + β₅ ?Popgr?²+ u

Explain if adding Popgr^2 is a good idea or not.

Interpret whether the relationship between Ln(GDPpc) and Popgr it is U-shaped or inverted U-shaped in Q7.

Interpret the impact of population growth on the GDP per capita in Q7 when population growth is 3%.

Run the following regression:
Ln(GDPpc) = β₀ + β₁ Alco + u

Comment on how the coefficient on "Alco" differs from that of Q1!

Why do you observe this difference and what does it mean for the (un)biasedness of the coefficient in Q8?

Describe each of the Gauss Markov Assumptions and specifically explain if they are likely to hold for the regression in Q1 or not.

Present a functioning R code reproducing the results.

Reference no: EM133407209

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