quesrion1-4

You decide to use your data analytics skills to nd out whether democracy has an impact on the economy. 1] The fnst thing that comes to your mind is to collect appropriate data to measure the level of democracy, the level of economy and other important factors. a. Explain why it would make more sense to use cross-country data rather than country-level or state-level data. What variables would you collect? Be clear about the variables, their denition and their usefulness for your analysis. [4 points] h. How would you measure the level of democracy? How would you measure the level of the economy? (3 points} c. ne of your colleagues looks at your data and claim that developed countries are disproportionally represented in your sample. What do they mean in statistical terms? Explain. (3 points} 2) You decide to rum a regression analysis to examine how democracy affect the economy. a. Write down the regression equation that you would estimate. Be sure to specify your dependent variable, your main explanatory variable of interest, and the control variables you would use. Justify them. {4 points] b. Give the interpretation of each coefficient in your regression. (3 points} c. Use the model to test the hypothesis that the democracy is good for the economy. Specify the null hypothesis, the alternative hypothesis, the appropriate test statistic and its distribution under the null. When would you conclude that there is indeed an evidence for your hypothesis? {3 points] 3] Due of your classmate believes that democracy is more important for the economy of developed countries than it is for those of developing countries. a. Write down the regression equation you would use to examine this claim. [4 points} b. Show how you would use the estimated regression to test the hypothesis that democracy indeed has a larger effect in developed countries than in developing countries. He sure to specify the null hypothesis, the alternative hypothesis, the appropriate test statistic and its distribution under the null, and the decision rule. [4 points] 4] Based on your results on part 2} andfor 3} above, what policy recommendations would you formulate? [2 points}