using a Hausman test identify which model you believe is more approperaite and justify your answer.

INSTRUCTIONS TO CANDIDATES

ANSWER ALL QUESTIONS

a.  Specify the model you will be estimating.  You wish to assess the effects of the log of GDP, the log of employment, the log of total factor productivity on the share of exports.

b. Outline your hypotheses detailing (i) your expectations for the signs of the variables and (ii) how the model chosen allows you to test your hypotheses.  Justify your answers with reference to the relevant literature.

c.   Describe each of the variables and how they vary across the countries you have been assigned. 

d. Estimate the model you have specified in part (a) using the fixed effects dummy variable (FEDV) model.  Comment on the results obtained with specific reference to differences across countries.

e.   Estimate the model you have specified in part (a) using the fixed effects within group model.  Comment on the results obtained and the advantages of this approach over the FEDV model.

f. Estimate the model you have specified in part (a) using the random effects model.  Comment on the results obtained.  What are the advantages of using the random effects model over the fixed effects models. 

 

g.   Using a Hausman test identify which model you believe is more approperaite and justify your answer. 

Attachments:

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