Question

A study modeled the GDP per capita of 24 countries using the variables Regulation Index, an index of Ethnolinguistic Diversity, International Trade as a share of GDP, Primary Education rate in %, and 1988 GDP/Capita. Parts of the regression output are shown below.

Dependent variable is: GDP/Capita

s = 2102

Source	Sum of Squares	df	Mean Square	Fratio
Regression	2,740,849,111	5	548,169,822	124
Residual	79,502,035	18	4,416,780

Variable	Coefficent	SE Coeff	T-ratio
Intercept	10,744.5	9425	1.14
Regulation Index	-1334.98	615.2	-2.17
Enthnolinguistic Diversity	-75.9773	24.3	-3.11
International Trade	51.4132	16.27	3.16
Primary Education	-62.7693	90.97	-0.69
1988 GDP/Capita	0.94936	0.0421	22.55

i) Is the model significant? Test using α = 0.10.

ii) Which predictors are significant in the presence of others? Use α = 0.01.

Answer 1

Solution:

i) Is the model significant? Test using α = 0.10.

Answer: To find whether the model is significant or insignificant, we need to find the p-value.

The p-value can be calculated using the Excel function.

Since the p-value is less than 0.10, we, therefore, conclude that the model is significant at 0.10 significance level

ii) Which predictors are significant in the presence of others? Use α = 0.01.

Variable	Coefficent	SE Coeff	T-ratio	P-value
Intercept	10,744.50	9425	1.14	0.2692
Regulation Index	-1334.98	615.2	-2.17	0.0436
Enthnolinguistic Diversity	-75.9773	24.3	-3.11	0.0060
International Trade	51.4132	16.27	3.16	0.0054
Primary Education	-62.7693	90.97	-0.69	0.4990
1988 GDP/Capita	0.94936	0.0421	22.55	0.0000

The p-value is found using the excel function

Since the p-value of Ethnolinguistic Diversity, International Trade, and 1988 GDP/Capita are less than 0.01, we, therefore, conclude that Ethnolinguistic Diversity, International Trade, and 1988 GDP/Capita are significant predictors.