3. In a 1991 issue of the Cato Journal, Santerre et al. estimate an infant morta
ID: 1136411 • Letter: 3
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3. In a 1991 issue of the Cato Journal, Santerre et al. estimate an infant mortality equation using a sample of 20 countries belonging to the Organization for Economic Cooperation and Development (OECD) during the six adjacent half decades from 1960 to 1985 and a fixed effects model. They obtained the following (abbreviated) results: MR = 393-0.06TME-0892RGDP-0.539PHYS + 0207. URBAN-0.004FLFPR-0.135ED (1.21) (2.34) (6.83) (6.89) (4.21) Adjusted r' ,954, N 110 (2.60(.112) All of the variables have been converted to logarithms so the coefficient estimates can be treated as elasticities. The numbers below the estimated coefficients repre- sent t-statistics. IMR infant mortality rate in each country for each year TIME-a time trend from 1 to 5 (1960 to 1985) capturing changing technology and RGDP -real gross domestic product per capita in each country for each year PHYS-number of physicians per capita in each country for each year URBAN-percentage of the population in urban areas in each country for each year FLFPR- female labor force participation rate in each country for each year ED-level of education in each country for each year. Based upon these findings answer the following questions: a. What percentage of the variation in the infant mortality rate is explained by the independent variables? How do you know that? theory about the relationship (direct or inverse) between the first three inde- b. Using health production theory as much as possible, provide a hypothesis or pendent variables and the infant mortality rate. c. Are those three hypotheses supported by the regression results? Explain. d. Given that the estimated coefficients are also elasticities, interpret the e. Should we expect the physician elasticity to remain constant if increasingly more f. Based upon those findings explain why the infant mortality rate may be so coefficients on the number of physicians and real GDP. physicians are employed in the typical health economy? Why or why not? much higher in Turkey than Japan?Explanation / Answer
a) From the value of adjusted R2 we can say that independent variables explain 95.4% of variations in IMR.
b) The first variable is TIME there will be a negative relation because with time there will be development taking place in the economy. The developments marked by increased GDP , improved health care facilities, increased literacy and so on.
The second variable is RGDP. There is a negative relationship with because now there will be increased health care expenditure, increased education expenditure these leads to reduction in IMR.
The third is PHYS. There is a negative relation as increase in physicians implies better health care facilities which leads to reduction in IMR.
c) No, the time variable is not significant as the t-staistic is small while the other two variables are significant.
d) The coefficient of PHYS the physicians increases by 1 percent the IMR on an average decreases by 0.54percent.
The coefficient of RGDP suggests tht as the RGDP increases by 1 percent IMR on average decreases by 0.89 percent.
* WE are supposed to solve only four sub-parts . For solution to other parts please post as adifferent question.
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