Data Source: T. Mamuneas, A. Savvides and T. Stengos, ”Economic Development and the Return to Human Capital: A Smooth Coefficient Semiparametric Approach”, Journal of Applied Econometrics, Vol. 21, No. 1, 2006, pp. 111-132. Annual data for 51 countries for 1985; one row of the data corresponds to one year for one country.
1. Define your main research question(s) by using your knowledge from economic theory classes.
2. Clearly define your dependent/outcome variable and 3 to 5 independent variables. One of the independent variables must be dummy/indicator variable.
3. Formulate a hypothesis about the relationship between the dependent variable and the independent variables.
4. Describe the data, plot the data, use descriptive statistics for this analysis.
5. Perform simple bivariate analysis, e.g. correlation matrix, scatterplot, discuss functional form, etc.
6. Build a multiple regression model and estimate its coefficients. Answer the questions about the statistical significance of the whole model, each of the slope coefficients, and how good the model is, e.g. the proportion of explained variance.
7. Interpret the regression coefficients.
8. Conduct the necessary hypothesis tests. Include at least one hypothesis test for general linear restrictions of two or more (but not all) slope coefficients.
9. Conclude and discuss the implications of your findings.
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