Analyze potential relationship between two variables by using publicly available data bases, such as the World Development Indicators. In the following, these variables are referred as the dependent and explanatory variables. In addition to these variables, you are asked to use a single control variable which is arguably a relevant factor in the determination of your dependent variable.

Collect and process the required data, and perform an econometric analysis in order to answer the following questions:

(1) Describe your dependent variable, explanatory variable of interest, and control variable, including their units of measurement.

(2) Write down your simple regression model for the population of interest (excluding the control variable). You can apply functional transformations, such as logarithm, to your variables.

(3) Estimate the model in part(2). Report your results in the equation form (the equation with with coefficient estimates and their standard errors). Interpret the coefficient estimate of your explanatory variable. Is it significant?

(4) Report the correlations between your dependent, explanatory and control variables.

(5) Estimate your model by including your control variable. Report the estimated model in the equation form. Compare the estimated coefficient of your explanatory variable with the one you obtained previously in part (3). Comment on the differences/similarities in view of your results reported in part (4).

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This study analyzes the effect of taxation on democracy level Taxation is the dependent variable measured as a percentage of GDP while democracy level is the predictor variable measured as Economic in... View the full answer