Homework_2_solution

# Homework_2_solution - Homework 2 Part 1 1a The distribution...

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0 5.0e-05 1.0e-04 1.5e-04 Density 0 10000 20000 30000 40000 50000 Real Per-Capita GDP 0 .005 .01 .015 .02 .025 Density 0 100 200 300 400 pm10 0 100 200 300 400 pm10 0 10000 20000 30000 40000 50000 Real Per-Capita GDP Homework 2 Part 1 1a) The distribution is skewed to the left, i.e. there are many more poor than rich countries 1b) The distribution is skewed to the left with many more low polluting countries than high polluting 1c) From the chart we can see that cities with high levels of per-capita GDP tend to have less pollution (although some countries with low GDP also have low levels of pollution – this indicates that there is probably heteroskedasticity in the population – the variance changes with GDP )

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2a) pm10=B 1 *pop2000 + B 2 *rgdpl + B 3 *(rgdpl) 2 2b) It means that if there is zero population and zero production per person (gdp= gross domestic product), then the expected value of pm10 will be zero. E(pm10)=E(ε)=0 2c) The marginal effect on ambient city pollution of increasing city population is the effect on pm10 by increasing p op2000 by 1, or ∆ pm10 = pop2000 dpm10dpop2000 =B 1 . According to our regression the value of B 1 is .0000124 (this is significant at the 1 percent level). This means that if a city’s population increases by 100,000 people pm10 would increase by 1.24. There are many ways to cut the data to evaluate if this is reasonable or not. One way is to look at the size and emissions of an average city (given the skewed distribution, median would have probably been better). The average city size in the sample is about 600,000 people. The average emissions for a city of between 500,000 and 650,000 people, is 65. If doubled the size of this city with another 600,000 people, then emissions will increase by about 8.5, or about 13%. This seems very low to me. Intuitively I would
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