You Have Collected Data for 104 Countries to Address the Difficult

Essay

You have collected data for 104 countries to address the difficult questions of the
determinants for differences in the standard of living among the countries of the world.
You recall from your macroeconomics lectures that the neoclassical growth model
suggests that output per worker (per capita income)levels are determined by, among
others, the saving rate and population growth rate.To test the predictions of this growth
model, you run the following regression: $$\widehat { \text { RelPersInc } } = 0.339 - 12.894 \times n + 1.397 \times s _ { K } , R ^ { 2 } = 0.621 , \text { SER } = 0.177$$ where RelPersInc is GDP per worker relative to the United States, n is the average
population growth rate, 1980-1990, and sK is the average investment share of GDP from
1960 to1990 (remember investment equals saving).
(a)Interpret the results.Do the signs correspond to what you expected them to be? Explain.