Based on data from 63 counties, the following model was estimated by least squares:

where
y` = growth rate in real gross domestic product
x1 = real income per capita
x2 = average tax rate, as a proportion of gross national product
The numbers below the coefficients are the coefficient standard errors. After the independent variable X1, real income per capita, was dropped from the model, the regression of growth rate in real gross domestic product on X2, average tax rate, was estimated. This yielded the following fitted model:

Comment on this result.

Transcribed Image Text:

R2-0.17 y = 0.58-0.052x1-0.005x2 (0.019) (0.042) ! = 0.060-0.074x2 R2 = 0.072 (0034)