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日期：2022-10-22 12:15

RMIT Classification: Trusted

Basic Econometrics

Research Report Group Assignment

This is a group assignment where you are allowed to work in groups of 1-4 other students. All group

members will receive the same marks for the assignment. You must submit an electronic copy of your

assignment in Canvas in pdf, doc or docx format along with your R-code. Hard copies will not be accepted.

Show your calculations (if any) as well as answering the questions in clear full sentences. The number of

tables, graphs, calculations given in parentheses after each question are a guide.

What determines the share of population who cannot afford a healthy diet?

For this home assignment you will be required to model the share of population worldwide who cannot afford

a healthy diet.

Please use the file: Nutrition_data.Rdata (World Bank Database – 2017 values). Please read the description

at the end of this document to understand the variables. In this home assignment we are going to model the

share of the population whose food budget is below the cost of a healthy diet (dependent variable).

QUESTION 1

Please model the share of the population whose food budget is below the cost of a healthy diet (who

cannot afford a healthy diet) using R:

a) Include a minimum of 5 (five) explanatory variables in the regression equation and provide a scatter

plot of your dependent and independent variables (5 scatter plots). (0.5 x 5 marks)

DO NOT USE regional dummies in this specification!

When modelling, explain each of your functional form specification choices with respect to:

• Economic or common sense behind the model - why do you pick this variable? (0.5 x 5 marks)

• Multicollinearity – are the independent variables multicollinear? (0.5 x 5 marks)

• Functional form specification- potential nonlinear relationships, eg: log-linear or quadratic

relationships. Explain why you use a level or logarithmic form of a variable. (0.5 x 5 marks)

in writing. You will be graded on model accuracy in this section.

Use OLS standard errors.

(Subtotal: 10 marks) 1 Table [regression output] & Explanations, 6 scatter plots

b) Interpret the coefficients on 5 explanatory variables. Describe if the coefficients are elasticities or

semi-elasticities, or simple level coefficients.

(5 marks)

c) Interpret the statistical significance of these coefficients using the p-values OR the t-stat.

(5 marks)

d) Test for heteroscedasticity in R using the Breusch-Pagan test and copy below the results. Interpret

the results of the Breusch Pagan test.

(2 marks) 1 Table & Explanation

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e) Present the results from a) using HAC robust errors! Did any of the standard errors change

significantly?

(3 marks) 1 Table & Explanations

f) Explain MLR 4, and whether this is likely to hold in your model? Can you identify any omitted

variables? (3 marks)

g) Please add regional dummies (Region) to the regression you estimated in section (a), and interpret

the coefficients on the regional dummies, along with their levels of significance. (3 marks)

New regression table, with dummy interpretation.

Test the joint significance of the regional dummies in the model! You can either perform the test

manually and show your work down below, OR do it in R and copy the solution code and output here.

(2 marks for the output & 2 mark for the interpretation)

(Subtotal: 7 marks)

h) Explain the basic concept of an instrumental variable estimation, and when to use it.

(2 marks)

.

i) Explain the practical/ policy relevance of your results. Describe a minimum of 2 policy proposals [

each 2-3 sentences] aiming at reducing the share of population that cannot afford a healthy diet!

(3 marks)

Assignment total: 40 marks

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VARIABLE DESCRIPTIONS: Source: www.worldbank.org

Cost of a healthy diet

Cost of the least expensive locally-available foods to meet

requirements for food-based dietary guidelines, in current PPP

dollar/person/day, for a representative person within energy

balance at 2330 kcal/day.

Percent of population with low food

budget

(DEPENDENT VARIABLE)

The share of the population whose food budget is below the

cost of a healthy diet. The food budget is defined as 52% of

household income, based on the average share of income that

households in low-income countries spend on food. Income

data are provided by the World Bank’s Poverty and Inequality

Platform. A value of zero indicates a null or a small number

rounded down at the current precision level.

Agriculture, forestry, and fishing, value

added (% of GDP)

Agriculture, forestry, and fishing corresponds to ISIC

divisions 1-3 and includes forestry, hunting, and fishing, as

well as cultivation of crops and livestock production. Value

added is the net output of a sector after adding up all outputs

and subtracting intermediate inputs. It is calculated without

making deductions for depreciation of fabricated assets or

depletion and degradation of natural resources. The origin of

value added is determined by the International Standard

Industrial Classification (ISIC), revision 4. Note: For VAB

countries, gross value added at factor cost is used as the

denominator.

Government expenditure on education,

total (% of GDP)

General government expenditure on education (current,

capital, and transfers) is expressed as a percentage of GDP. It

includes expenditure funded by transfers from international

sources to government. General government usually refers to

local, regional and central governments.

Exports of goods and services (% of

GDP)

Exports of goods and services represent the value of all goods

and other market services provided to the rest of the world.

They include the value of merchandise, freight, insurance,

transport, travel, royalties, license fees, and other services,

such as communication, construction, financial, information,

business, personal, and government services. They exclude

compensation of employees and investment income (formerly

called factor services) and transfer payments.

GNI per capita, PPP (current

international $)

This indicator provides per capita values for gross national

income (GNI. Formerly GNP) expressed in current

international dollars converted by purchasing power parity

(PPP) conversion factor. GNI is the sum of value added by all

resident producers plus any product taxes (less subsidies) not

included in the valuation of output plus net receipts of primary

income (compensation of employees and property income)

from abroad. PPP conversion factor is a spatial price deflator

and currency converter that eliminates the effects of the

differences in price levels between countries.

Industry (including construction), value

added (% of GDP)

Industry (including construction) corresponds to ISIC

divisions 05-43 and includes manufacturing (ISIC divisions

10-33). It comprises value added in mining, manufacturing

(also reported as a separate subgroup), construction,

electricity, water, and gas. Value added is the net output of a

sector after adding up all outputs and subtracting intermediate

RMIT Classification: Trusted

inputs. It is calculated without making deductions for

depreciation of fabricated assets or depletion and degradation

of natural resources.

Average precipitation in depth (mm per

year)

Average precipitation is the long-term average in depth (over

space and time) of annual precipitation in the country.

Precipitation is defined as any kind of water that falls from

clouds as a liquid or a solid.

Total natural resources rents (% of

GDP)

Total natural resources rents are the sum of oil rents, natural

gas rents, coal rents (hard and soft), mineral rents, and forest

rents.

Access to electricity, rural (% of rural

population)

Access to electricity, rural is the percentage of rural

population with access to electricity.

Rural population growth (annual %)

Rural population refers to people living in rural areas as

defined by national statistical offices. It is calculated as the

difference between total population and urban population.

Services, value added (% of GDP)

Services correspond to ISIC divisions 50-99 and they include

value added in wholesale and retail trade (including hotels and

restaurants), transport, and government, financial,

professional, and personal services such as education, health

care, and real estate services. Also included are imputed bank

service charges, import duties, and any statistical

discrepancies noted by national compilers as well as

discrepancies arising from rescaling. Value added is the net

output of a sector after adding up all outputs and subtracting

intermediate inputs. It is calculated without making deductions

for depreciation of fabricated assets or depletion and

degradation of natural resources. The industrial origin of value

added is determined by the International Standard Industrial

Classification (ISIC), revision 3 or 4.

Population in urban agglomerations of

more than 1 million (% of total

population)

Population in urban agglomerations of more than one million

is the percentage of a country's population living in

metropolitan areas that in 2018 had a population of more than

one million people.

Region

Countries are classified by region: Europe & Central Asia,

Middle East & North Africa, Sub-Saharan Africa, Latin

America & Caribbean, East Asia & Pacific, South Asia; and

North America

Income group

Economies are divided among income groups according to

gross national income (GNI) per capita. The groups are: low

income, $1,085 or less; lower middle income, $1,086 to

$4,255; upper middle income, $4,256 to $13,205; and high

income, $13,206 or more.