Suppose You Are Interested in the Factors That Explain GDP

question 19

Essay

Suppose you are interested in the factors that explain GDP all over the world.You gather data for the most recent year on GDP,Education level,Household Consumption,and Number of People Employed for every country in the world and you specify the following model. $$\begin{array} { ll } \log ( G D P ) = &\beta _ { 0 } + \beta _ { 1 } \text { Education Level } + \beta _ { 2 } \text { Household Consumption } \\&+ \beta _ { 3 } \text { Num People Employed } + \varepsilon \\\end{array}$$
a)You are able to find data for GDP,Household Consumption,Number of People Employed for every country but Education Level is missing for 40% of the countries.What are your options when estimating this model?
b)What type of countries do you think have missing data for Education Level? Why?
c)If you ran a regression with only the 60% of countries that don't have missing values,do you think your results would be different than if you had been able to gather data on all countries? Why or why not?

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Definitions:

Reaction Formation

A defense mechanism in which unacceptable impulses are transformed into their opposite, often as a way of coping with anxiety.

Id Impulses

Primitive instincts and drives present from birth, according to Freudian theory, that operate at the unconscious level.

Superego

In psychoanalytic theory, the part of the personality that represents internalized ideals, ethics, and provides standards for judgment.

Ego Function

Psychological processes associated with the self that are responsible for perception, judgment, tolerance of ambiguity, and reality testing.