You Have Collected Data for 104 Countries to Address the Difficult

question 50

Essay

You have collected data for 104 countries to address the difficult questions of the
determinants for differences in the standard of living among the countries of the world.
You recall from your macroeconomics lectures that the neoclassical growth model
suggests that output per worker (per capita income)levels are determined by, among
others, the saving rate and population growth rate.To test the predictions of this growth
model, you run the following regression: $$\widehat { \text { RelPersInc } } = 0.339 - 12.894 \times n + 1.397 \times s _ { K } , R ^ { 2 } = 0.621 , \text { SER } = 0.177$$ where RelPersInc is GDP per worker relative to the United States, n is the average
population growth rate, 1980-1990, and sK is the average investment share of GDP from
1960 to1990 (remember investment equals saving).
(a)Interpret the results.Do the signs correspond to what you expected them to be? Explain.

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Definitions:

Income Tax Rate

The percentage at which an individual or corporation is taxed on their income, which can vary based on the income amount and tax laws.

Straight-Line Depreciation

A practice for dispersing the expense of a concrete asset across its functional life in regular yearly sums.

Working Capital

This denotes a financial metric highlighting a company’s short-term financial health, specifically its ability to cover short-term liabilities with its short-term assets.

Straight-Line Depreciation

A method for distributing the financial commitment of a physical asset over its operational life in uniform yearly figures.