Question

Suppose you were investigating this research question: What is the impact of state tax and regulatory policy on long run (10 years or more) state economic growth?

1. Express a simple equation expressing the functional relationship (construct) of this research question along with other possible influences on long run state economic growth. What is the dependent variable, (causal) independent variables of main interest, and control variables?

2. What might be a way to specifically measure (operationalize) the dependent variable?

3. What might be way to specifically measure (operationalize) the key independent variables?

4. What might be specific ways to measure (operationalize) the control variables?

5. Express an equation in regression format that includes these specific measures and specific measures of the control variables.

6. Besides including some control variables, develop a strategy for taking account of different influences on state growth across states that may not be fully (or even partly) taken into account by the control variables. This might include sub-samples, interactions, matching ... (Think in terms of trying to devise a way to compare states that are similar in important ways but have different tax/regulatory policies.)

7. Consider the potential for endogeneity of tax/regulatory policy. What factors might influence them? Might state economic growth influence them

Answer 1

Tax on Long Run

GDP will be low due to continues low savings due to tax decreases, the private savings are negative as there is trade deficit and the savings are negative, high private savings due to low consumption expenditure, low national savings ,interest rates are still higher ,high net exports ,exchange rates are low as the dollar value increase at the low rates.

Government policy can influence interest rates, a rise in which increases the cost of borrowing in the business community. Higher rates also lead to decreased consumer spending.

Government intervention, taxation and regulation can affect industries . Those are some additional effects that the government can have when they tax and regulate products and services.

A dependent variable is a variable whose value depends upon independent variables. The dependent variable is what is being measured in an experiment or evaluated in a mathematical equation. The dependent variable is sometimes called the outcome variable.

An independent variable is a variable believed to affect the dependent variable.

Independent variable of interest. or a factor of interest. It is an “input” variable and is a factor that a researcher manipulates within a controlled environment in order to test the impact.

Example :

(A city planner who wants to compare the number of drivers go through red lights between 8 p.m. and 9 p.m. with the number of drivers who do so between 9 p.m. and 10 p.m. In this scenario, the time span is the independent variable and the difference in the number of drivers going through red lights during those time spans is the dependent variable).

Control variable: A variable that is held constant in order to assess or clarify the relationship between two other variables. Control variable should not be confused with controlled variable, which is an alternative term for independent variable.

A dependent variable is what you measure in the experiment and what is affected during the experiment.

The dependent variable is what is being studied and measured in the experiment. It's what changes as a result of the changes to the independent variable.

An experiment has several types of variables, including a control variable viz. controlled variable). Variables are just values that can change.

Example of controlled variable Temperature .