Per capita income depends on the savings rate of the country: e.g. countries who save more...

Per capita income depends on the savings rate of the country: e.g. countries who save more end up with a higher standard of living. To test this theory, you collect data from the Penn World Tables on GDP per worker relative to the United States (RelProd) in 1990 and the average investment share of GDP from 1980-1990 (SK), remembering that investment equals saving. The regression results (using heteroskedasticity-robust standard errors) are:

RelProd = −0.08 + 2.44 ×SK , R2 = 0.46, SER = 0.21 (0.04) (0.26)

(Q4) Interpret the regression results carefully (including both coefficients and the R2) and Calculate the t-statistics to determine whether the two coefficients are significantly different from zero. Justify the use of a one-sided or two-sided test.

Expert Solution

orchestra answered 1 year ago

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