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ECON7040 Research Assignment

Semester 1, 2023

In this research assignment, you need to conduct an empirical research about the determinants of cross country heterogeneity in GDP per capita .

Your research should include:

-     A title and a short introduction.

-     A literature review, focusing on growth empirics literature.

-     An empirical section that describe data and methodologies and regression results.    Hint: the choice of variables in your regression should be supported by the literature review in the previous section.

-     A short conclusion.

The suggested word limit is 2000 words (references and appendices are not included in the word count).

In the empirical section, you are asked to use the Macrohistory database. These data have a much smaller number of countries but a much larger number of years per country. First of

all, familiarize yourself with the dataset and variables. All the relevant information is here:

https://www.macrohistory.net/database/ .

•   After familiarizing with the dataset, select a subgroup of variables that you consider are  relevant to understand the drivers of countries’ GDP per-capita. To make this decision     use the models we used in lectures as a guide. However, you are free to think out of the box and look for relevant relationships we have missed so far1 . You can collect additional data for your empirical section.

•   Provide descriptive statistics on your variables (number of observations, mean, median, standard deviation).

•   Proceed to estimate the relationship between (log) GDP per-capita or GDP growth (your choice) and the variables of interest that you selected. Start by estimating a simple OLS  regression with all the countries pooled together. Interpret the coefficients of the regression and discuss econometric and economic issues behind the results. Can you      make sense of the results using any existing theory? Are your results consistent with previous literature?

•   Discuss the econometric issues of your OLS estimates.

•   Extend the previous analysis and estimate a panel fixed-effect regression to control for countries’ unobserved heterogeneity that might shape the observed heterogeneity in GDP per-capita (growth)2 . How different are the results compared to OLS? Are your results consistent with previous literature?

•   Using the panel fixed effect to investigate how the relationship between GDP per- capita and your X” variables have changed overtime. In particular, how different are the           results of the model when you restrict the sample before 1945 (regression using sample 1870- 1945) and after 1945 (regression using sample 1946-2020)? Discuss your results     from an economic perspective, considering the major economic episodes during each subperiod.

•   Finally, investigate how important is the sample of countries in determining your results. For example, do your results change substantially when excluding US or Australia or Japan from the sample? Discuss potential explanations for your findings.

Submission Instructions

You must submit to Turnitin a final report (pdf file) for the research project, including graphs and tables (when necessary). The report must contain a list of references used in the analysis/discussion of results (in-text citation also required). Students also submit (to Blackboard link instead) their replication data, log file and codes (You can use Stata or R or any econometric software). The suggested format is 1.5 lines spacing, font size 12.

The submission is due by 4pm, 5th of May, 2023.