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ORF 245 - Final Project

ORF 245 - Final Project - 2009 Princeton University...

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2009 Princeton University Christian Rolon Mike McPherson Christian Villaran
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[ FACTORS IN REAL GDP PER CAPITA AND PERCENTAGE GROWTH ] This report is a statistical analysis of four factors (trade share, average years in school, number of assassinations, and number of revolutions) and their effects on real GDP per capita and percentage growth in 65 countries. We first look for correlations between these factors and GDP per capita, then again separately between the factors and percentage growth. By conducting linear regression analysis we will hopefully be able to make some generalizations about what conditions are favorable for higher GDP per capita and percentage growth.
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Factors in Real GDP per Capita and Percentage Growth Source of Data: http://wps.aw.com/aw_stock_ie_2/50/13016/3332253.cw/index.html Our particular data is under “Data for Empirical Exercises” on the left side bar From there it can be found under the “Growth Data” heading Problem to be Solved: According to Endogenous Growth Theory of economics, conditions within a country (be they cultural, social, or political) have major effects on their economic success. What we are trying to analyze is how four particular factors (defined below) within 65 countries affect both their GDP per capita and percentage growth. [The reason for analyzing both GDP per capita and percentage growth is because what would be considered a substantial GDP per capita growth in one country could be a very minimal growth in another (e.g. a 6 billion growth in the US would not be as substantial as a 6 billion GDP growth in a poorer African nation).] Variables: 1) Tradeshare – the average share of trade in the economy from 1960–1995, measured as the sum of exports plus imports divided by GDP. 2) Years of schooling - average number of years of schooling of adult residents in that country in 1960 3) Revolutions/Coups - average number of revolutions, insurrections (successful or not) and coup d’etats in that country from 1960-1995 4) Assassinations - average annual political assassinations in that country from 1960-1995 (per million population) The Objective: The objective is to be able to label factors as either positive (as in, positive for economic success) or negative (as in, negative for economic success). In this way we will be able to make some over-arching generalizations about what kind of political and social conditions are best for economic success. [Hypothetical example for clarity: In the case that “years of schooling” and “trade shares” have a strong positive correlation with real GDP per capita, and “assassinations” and “revolutions/coups” have a strong negative correlation with real GDP per capita, we could say that a country with high average years of schooling, high trade shares, low number of assassinations, and low number of revolutions/coups is more stable society, and is also positively correlated with GDP per capita.]
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The Method/Implementation of Method: 1) We will first be conducting multiple simple linear regression models and find lines of best fit for our graphs that compare our factors with GDP per capita. All these calculations will be done in
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