An Extension of the Solow Growth Model That Includes Human

question 48

Essay

An extension of the Solow growth model that includes human capital in addition to
physical capital, suggests that investment in human capital (education)will increase the
wealth of a nation (per capita income).To test this hypothesis, you collect data for 104
countries and perform the following regression: $$\begin{array} { l } \widehat { \text { RelPersInc } } = 0.046 - 5.869 \times \text { gpop } + 0.738 \times s _ { K } + 0.055 \times \text { Educ, } R ^ { 2 } = 0.775 , \text { SER } = 0.1377 \\\begin{array} { l l l l } &&&&&( 0.079 ) & ( 2.238 ) &&&& ( 0.294 ) & &&( 0.010 )\end{array} \\\end{array}$$ where RelPersInc is GDP per worker relative to the United States, gpop is the average
population growth rate, 1980 to1990, sK is the average investment share of GDP from
1960 to1990, and Educ is the average educational attainment in years for 1985.Numbers
in parentheses are for heteroskedasticity-robust standard errors.
(a)Interpret the results and indicate whether or not the coefficients are significantly different
from zero.Do the coefficients have the expected sign?

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Definitions:

Molten Rock

Molten rock, also known as magma (beneath the earth's surface) or lava (on the earth's surface), is a hot, fluid state of rocks that have melted due to high temperatures within the Earth.

Giant Arthropods

Large, extinct or extant invertebrates within the arthropod phylum, such as some ancient insects or land-dwelling crustaceans.

Carboniferous

A geological period approximately 359 to 299 million years ago, characterized by the widespread presence of coal-bearing deposits.

O2 Levels

The concentration of oxygen in a given environment, crucial for the respiration of most aerobic life forms.