Regression analysis

A researcher is interested in the relationship between migration and trade, and she is especially interested in the case of Chinese migrants. She argues that migration has positive effects on international trade, as ethnic diasporas facilitate trade between nations. Her hypothesis is the following: the higher the share of Chinese heritage population in one country, the more goods are exchanged between this country and China.

To test this hypothesis, the researcher collects data for two variables and a sample of 140 countries. The first is the share of the Chinese-heritage population, which is measured as a proportion ranging from 0 (0%) to 1 (100%). Second, trade with China is measured as the sum of imports from and exports to China as a share of the country's GDP (this variable is measured with the same scale as the first variable). The table below reports results for regression analysis (standard errors in parentheses): answer the following questions based on these results.

a) describe what the coefficient for the variable "Share of Chinese population" tells us about the relationship between migration from China and trade with China.

b) Test if the coefficient for "Share of Chinese population" is statistically significant at the .05 level. Specify null and alternative hypotheses for a two-tailed test, calculate t-statistic and p-value, assess if the null hypothesis can be rejected and draw a conclusion about the effect of the independent variable on the dependent variable.

c) What is the expected level of trade with China (as a share of GDP) for a country where people of Chinese heritage constitute 7% of the population?

d) How can the coefficient for "Constant" be interpreted?

e) How can the "R-squared" figure be interpreted?

Dependent Variable: Trade with China Share of Chinese population 2.143 (0.918) Constant 0.038 (0.001) Observations 140 R-squared 0.34