Consider a Typical Beta Convergence Regression Function from Macroeconomics, Where

question 19

Essay

Consider a typical beta convergence regression function from macroeconomics, where the growth of a country's per capita income is regressed on the initial level of per capita income and various other economic and socio-economic variables. Assume that two of these variables are the average number of years of education in the specific country and a binary variable which indicates whether or not the country experienced a significant number of years of civil war/unrest. Explain why it would make sense to have these two variables enter separately and also why you should use an interaction term. What signs would you expect on the three coefficients?

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