(a) Estimate a bivariate model with instability as the dependent variable and democracy as the independent variable. Because the units of the variables are not intuitive, use standardized coefficients to interpret.Briefly discuss the estimated relationship and whether you expect endogeneity. (1 point)

b) To combat endogeneity, include a variable for lagged GDP. Discuss changes in results, if any. (1 point)

(c) Perhaps GDP is better conceived of in log terms. Estimate a model with logged-lagged GDP and interpret the coefficient on this GDP variable. (1 point)

(d) Suppose we are interested in whether instability was higher or lower during the Cold War. Run two models. In the first, add a Cold War dummy variable to the preceding specification. In the second model,add a logged Cold War dummy variable to the above specification.Discuss what happens. (2 points)

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TABLE 7.3 Variables for Political Instability Data Variable Description Ccode Country code Year Year Instab Index of instability (revolutions, crises, coups, etc.); ranges from -4.65 to +10.07 Coldwar Cold War year (1 = yes, 0 = no) = GDPlag GDP in previous year Democracy Democracy score in previous year, ranges from 0 (most autocratic) to 100 (most democratic)