Question

how would you test the impact of the disease on economic growth using data from a cross-section of countries and also from one individual country? In particular, explain how you would attempt to find a causal relationship from disease to economic growth?

Answer 1

To test the impact, steps can be used as follows.

Step 1: Collect the data of number of occurrences of diseases in a particular year across the different countries and real GDP per capita of these countries.

Step 2: Build a regression equation where the dependent variable will be real GDP per capita and independent variable will be the occurrences of diseases.

Step 3: Now, using a regression equation, impact of the disease as well as direction of impact, can be assessed upon the economic growth.

Step 4: With respect to a particular country,  number of diseases each year for last few years and real GDP per capita for each of the past few years, can be first put into the tabular form. Then, these data can be put for regression analysis. It will build a model, where the impact of diseases upon the real GDP per capita, will be identified.

Causal relationship will be identified using the impact of diseases upon the economic growth. In general, more number of occurrences of diseases, will lead to the loss of people at work, leading to the decrease in output level. It will reduce the real GDP per capita in the country.