Test 1 Data Analysis – It is very important you use your critical thinking skills to answer these questions. Each question is worth 25 points. This essay test will be weighted as half of your midterm.

Essay Question 1

Read the Wikipedia article on confounding https://en.wikipedia.org/wiki/Confounding before answering this question:

There is a growing interest among political economists in the factors which influence civil strife (e.g. civil wars, guerrilla wars, terrorism, etc.). Some researchers feel that civil strife may be related to environmental factors (e.g. shortages of clean water and good farmland, deforestation, etc.) as well as political and economic ones. In order to investigate this hypothesis I have collected data from N = 91 countries on the following variables:

Y = number of lives lost due to civil strife in the last 10 years.

X1 = average annual GDP growth over the last 10 years (measured as a percentage so that a value of, say, 2 means average annual GDP growth of 2%).

X2 = an index of environmental scarcity. (Precise details of the definition of this variable are unimportant; note only that it is a number between 0 and 100 and higher values of this variable indicate more environmental scarcity problems.)

D = a dummy variable which equals 1 if the country is a democracy, and equals 0 otherwise.

Results from a regression of of Y on X1, X2 and D are given below in OUTPUT 1.

I then constructed another variable, Z = X2 × D, and ran a regression of Y on X1, X2, D and Z. Results from this regression are given below in OUTPUT 2.

Use these regression outputs to write a brief report on the effect of environmental, political and economic factors on civil strife. Your report should include:

A discussion of whether you would use OUTPUT 1 or OUTPUT 2 (or both) as the focus of a report.

A discussion of how coefficient estimates can be interpreted.

A discussion of the statistical significance of your results.

A discussion of what light the results shed on the question of interest (i.e. the effect of environmental, political and economic factors on civil strife).

Anything else that you would like.

Essay Question 2

Discuss Angus Deaton’s thesis in The Great Escape: Health, Wealth, and the Origins of Inequality. How does he use his data to advance his main argument? How strong is his argument based upon the data he is using? What data would make his argument stronger and would it be worth the expenditure of resources to get this data?