Question: Guy is interested in the determinants of growth in emerging markets, in particular whether education (human capital), political stability, and fiscal variables play a role. He has run the following regression of growth rates for countries from 1960 to 1985 upon country characteristics. The average annual growth rate of real (inflation-adjusted) GDP per capita from 1960 to 1985 (2% growth is .02) is regressed on: a constant, initial values of real GDP(GDP60) per capita (in $1000s), secondary and primary school enrollment rates in fractions (SEC60 and PRIM60), the share of real government ‘consumption’ expenditures to real GDP for 1970-1985 ( \({{g}^{c}}/y\) ), revolutions from 1960-1985 (REV), assassinations per million (ASSASS), and region indicator variables for Africa and Latin America. Guy got the following estimates (the dependent variable is Growth Rate of Real GDP 1960-85). Is this evidence consistent with the following claims made by Guy, or not? Explanation required.

(a) There does not seem to be any relationship between political unrest and growth.

(b) If all I know about a country is that it is in Latin America, I should expect that

its growth rate is less than the average growth rate for non-African, non-Latin American countries.

(c) If there were two groups of countries, A and B, that are identical in terms of all

these regressors except that countries in group A have a government consumption to output ratio \({{g}^{c}}/y\) that is twice the \({{g}^{c}}/y\) of the countries in group B; then on average, group A countries grew approximately 5% to 15% faster than those in B.

(d) The difference between average growth for two groups of countries that were identical except one had a primary school enrollment rate of .80 and one had an enrollment rate of .90 is probably more than one percentage point.