Question
In this part, we replicate a part of the analysis in J. Vernon Henderson, Adam Storeygard, and David N. Weil, Measuring Economic Growth from Outer
In this part, we replicate a part of the analysis in J. Vernon Henderson, Adam Storeygard, and David N. Weil, "Measuring Economic Growth from Outer Space," American Economic Review 102, no. 2 (2012): 994-1028. Countries report their GDP to World Bank which goes into World Bank database after some verification steps. However, some countries have incentives to exaggerate their GDP, and they tend to report inflated numbers to World Bank. To remedy this problem, the authors predict the GDP growth of countries with the level of their light emissions observed from space. Any discrepancy found in the reported GDP and predicted GDP suggest a chance that those governments may be misreporting the numbers. Import aer_gdp_space.csv and answer the following questions. Create a new variable gdp_growth as the growth of gdp. (Growth rate is computed as follows: 100 XtXt1 Xt1 ) Create a new variable light_growth as the growth of light emission. Run a linear regression of gdp_growth against light_growth. Interpret your result. Predict the GDP growth of countries based on your regression result. Visualize your prediction against the observed GDP growth. (Extra credit) Which country shows the greatest discrepancy? Visualize or tabulate the 20 countries that show the biggest discrepancies between observed GDP growth and predicted GDP growth.
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