Reference no: EM133781156 , Length: word count:2500

Basic Econometrics

Learning Outcome 1: Critically analyse and synthesise data to formulate effective economic and business decisions.

Learning Outcome 2: Effectively communicate business data and econometric concepts to professionals and nonprofessionals in diverse business contexts.

Learning Outcome 3: Apply technical and analytical knowledge to provide specialist advice to people from business disciplines in diverse business contexts.

Learning Outcome 4: Apply reasoned judgements to solve a variety of statistical and econometric problems in business disciplines such as Accounting, Economics, Finance and Marketing, with reference to business,

Basic Econometrics

What determines the share of population who cannot afford a healthy diet?

For this home group assignment you will be required to model the share of population worldwide who cannot afford a healthy diet.

Please use the file: Nutrition_data.Rdata (World Bank Database). Please read the description at the end of this document to understand the variables. In this home assignment we are going to model the share of the population whose food budget is below the cost of a healthy diet (dependent variable).

QUESTION 1

Please model the share of the population whose food budget is below the cost of a healthy diet (who cannot afford a healthy diet) using R:

Include a minimum of 5 (five) explanatory variables in the regression equation and provide a scatter plot of your dependent and independent variables (5 scatter plots).

DO NOT USE regional dummies in this specification!

When modelling, explain each of your functional form specification choices with respect to:

Economic or common sense behind the model - why do you pick this variable?
Multicollinearity - are the independent variables multicollinear?
Functional form specification- potential nonlinear relationships, eg: log-linear or quadratic relationships. Explain why you use a level or logarithmic form of a variable.
in writing. You will be graded on model accuracy in this section.

Interpret the coefficients on 5 explanatory variables. Describe if the coefficients are elasticities or semi-elasticities, or simple level coefficients.

Interpret the statistical significance of these coefficients using the p-values OR the t-stat.

Test for heteroscedasticity in R using the Breusch-Pagan test and copy below the results. Interpret the results of the Breusch Pagan test.
1 Table & Explanation

Present the results from a) using HAC robust errors! Did any of the standard errors change significantly?
1 Table & Explanations

Explain MLR 4, and whether this is likely to hold in your model? Can you identify any omitted variables?

Please add regional dummies (Region) to the regression you estimated in section (a), and interpret the coefficients on the regional dummies, along with their levels of significance.

New regression table, with dummy interpretation.

Test the joint significance of the regional dummies in the model! You can either perform the test manually and show your work down below, OR do it in R and copy the solution code and output here. (2 marks for the output & 2 mark for the interpretation)

Explain the basic concept of an instrumental variable estimation, and when to use it.

Explain the practical/ policy relevance of your results. Describe a minimum of 2 policy proposals [ each 2-3 sentences] aiming at reducing the share of population that cannot afford a healthy diet!

Overview

You are required to work in small groups [1-4 people] to complete the assignment. The assignment can be done individually, but choosing to do so does not impact the extent of the assignment. Once ready, please upload the assignment along with your R code (copied into the Word file) to Canvas.

The R code is evidence that you have completed the assignment and your code is reproducing the results. Without it, the assignment submission is not complete!