Module Code: MAN2905M

Econometrics and
Business Forecasting
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The demographic transition:
fertility, life expectancy, GNI and
female literacy, a reciprocal lin-log
model
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Index
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1. Statement of the Problem ....................................................................
2. Review of the Literature ......................................................................
3. The Economic Model ...........................................................................
4. The Econometric Model .......................................................................
4.1. The Functional Model .....................................................................
4.2. The ariable! ...................................................................................
4.3. The E"#ected Si$n! .........................................................................
4.4. The Error Term ...............................................................................
%. The &ata ................................................................................................
'. The E!timation and (nference Procedure ..........................................
#a$e 3
#a$e 4
#a$e %
#a$e '
#a$e '
#a$e '
#a$e )
#a$e )
#a$e *
#a$e +
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1. Statement of the Problem
The ,ue!tion that !hall be addre!!ed in thi! !tud- i!. to what e"tend and how the fertilit- rate
of a countr- i! correlated to im#rovement! in health. education and wealth. The demo$ra#hic
tran!ition. a! it i! /nown in economic!. ha! man- inter#retation! and the limitation of an-
#rediction !hall al!o be !ub0ect of the di!cu!!ion.
The !ub0ect of thi! re!earch i! relevant for #olic- deci!ion!. !ince an a$ein$ #o#ulation in
wealth- countrie! and the fall in fertilit- will re!ult in more #en!ion! to be #aid b- le!! -oun$
wor/er!. Polic- ma/er! can al!o ta/e their cue! on what variable affect! the fertilit- rate. 1-
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mani#ulatin$ the!e. a countr-2! fertilit- rate could be directed toward! a tar$et. 3owever. the
!en!ibilit- and reliabilit- of !uch mani#ulation i! onl- !#eculative.
The lin/ between fertilit- decline and the increa!e in wealth i! the !ub0ect of a variet- of
academic !ub0ect!. Economic! and !ociolo$- are the mo!t evident. but thi! counterintuitive
demo$ra#hic ob!ervation #ermeate! into other academic !ub0ect! 4#olitical !cience!. medicine.
mar/etin$. #!-cholo$-5.
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2. Review of the Literature
&emo$ra#hic tran!ition. the ob!ervation of a ne$ative relation!hi# between fertilit- and
wealth ha! been !ub0ect of careful and !ub!tantial re!earch effort!. both in the field! of
!ociolo$- and economic!.
1r-ant 4266)5 identifie! the ma0or theorie! a! 7!ocioeconomic8. 7demand8 and 7ad0u!tment8
theorie!. The!e theorie! !earch for the cau!ation in the #arent2! deci!ion to limit re#roduction
ba!ed on economic and !ocial chan$e! in the environment. 7&iffu!ional8. 7ideational8 and
7innovation8 theorie! on the other hand tr- to lin/ cau!e and effect throu$h the !#read of idea!
and method! to limit re#roduction. 1r-ant ar$ue! that on one hand that !ocioeconomic effect!
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are ea!ier to ,uantif- and ob!erve but on the other hand diffu!ional theorie! have valid #oint!
4famil- #lannin$. contrace#tion. ...5.
9ir/ 41++'5 add! that !ocioeconomic inter#retation! of the #arado" are different e"#re!!ion!
of the !ame a!!um#tion: ; #o#ulation with a low level of infra!tructure and little acce!! to
health !ervice! increa!e! it! re#roductive effort! to off!et the hi$h de$ree of child mortalit-
49ir/. 1++'5. (n other word!. the- have more children to increa!e the chance of !urvival of a
few. Lee 426635 add!. that wealthier #arent! limit off!#rin$ to dedicate the available re!ource!
to the child2! education and onl- #rocreate once the e"i!tin$ off!#rin$ i! cared for.
1arber 426615. a diffu!ional theori!t. con!ider! the !#read of new idea! and technic! to limit
re#roduction to be the main rea!on for the tran!ition. Famil- #lannin$ and contrace#tion are
amon$!t the mo!t re!earched variable!.
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; re!earch conducted b- Mi//o 4266+5 !u$$e!t! that. althou$h the relation!hi# i! ne$ative.
!ome countrie! with a human develo#ment inde" above 6.+ e"#erience a #o!itive turn. ;
#o!!ible rea!on for thi! correlation i! e"#lained throu$h the #re!ence of !trict di!crimination
law! that offer women the chance to have children without loo!in$ out on career o##ortunitie!
and the a!!um#tion. that there i! a lower limit for fertilit- rate!.
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3. The Economic Model
The economic variable that !hall be e"#lained i! the fertilit- rate and will be e"#lained b- the
followin$ variable!.
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Fi$ure 3.1: Scatter dia$ram of the variable!
The <ro!! =ational (ncome 4<=(5 #er ca#ita !hall !erve a! the indicator of a countr-2!
develo#ment. indu!triali!ation and di!#o!able income. The Life e"#ectanc- in thi! !tud- i! a
#ro"- for the ,ualit- of a countr-2! healthcare and nutrition. The literac- rate of women !how!
to what e"tend women are educated and em#owered to #lan their famil- and #rovide a better
!tandard of care for their newborn.
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Fi$ure 3.2: 3i!to$ram of fertilit- rate!
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(f a countr- achieve! a hi$her income level 4<=( #er ca#ita5. better health care can be
#rovided to it! citi>en! and hence health #rovi!ion !hould im#rove 4Life e"#ectanc-5. The better
health care !-!tem hel#! to decrea!e child mortalit- and cau!e! the fertilit- to fall !ince more
off!#rin$ !urvive!. The hi$her level of income lead! #arent! to dedicate more income toward! a
child2! education and thereb- limitin$ famil- !i>e. Si>e ha! a cultural com#onent and the !#read
of modern idea! b- educated women 4female literac-5 can influence it. Educated women are
al!o a!!umed to /now about di!ea!e! and how to #revent infection! and reduce infant mortalit-.
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4. The Econometric Model
4.1. The Functional Model
The model loo/! at the decrea!e in fertilit- with a relative chan$e in life e"#ectanc-. <=(
#er ca#ita and female literac-. For thi! #ur#o!e a combination of lin?lo$ and reci#rocal model
ha! been u!ed. The rational behind thi! functional model i! the followin$: ;t low life
e"#ectanc-. <=( and literac- level! a #ro#ortional im#rovement i! !i$nificant. but become! le!!
im#ortant at hi$her value!. @ountrie! with alread- hi$h value! don2t $ain a! hi$h a benefit a!
countrie! at lower level!. therefore lin?lo$. Secondl-. a! ar$ued b- Mi//o 4266+5. the fertilit- i!
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a!!umed to tend toward! an a!-m#tote. thi! value however i! below the re#lacement fertilit-
rate of 2.1 a! one can !ee in fi$ure 4.2.2.
Ai ... Fertilit- rate
B6 ... (nterce#t
C1i ... Life e"#ectanc-
C2i ... <=( #er @a#ita
C3i ... female literac- rate
Formula 4.1.1: econometric fertilit- model reflectin$ relevant demo$ra#hic tran!ition
theorie!
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4.2. The variable!
Female literac- i! a ratio b- it!elf. but to ca#ture the different effect! an im#rovement ha! at
different #ercenta$e level! it i! lo$$ed and divided b- one to im#o!e on the model an a!-m#tote.
Thi! a!-m#tote i! the fertilit- rate that e"i!t! re$ardle!! of im#rovement! in <=( #er @a#ita.
Fertilit- rate and education. The !ame rational a##lie! to life e"#ectanc-. (m#rovin$ the life
e"#ectanc- in countrie! with low value! affect! mortalit- and hence fertilit- !i$nificantl- more
than in countrie! with hi$her value!. The variable! are hi$hl- correlated a! ar$ued in the
economic model 4!ee Table 4.4.15. (m#rovement! in one tri$$er im#rovement! in the other! and
vice ver!a.
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Table 4.4.1: @orrelation Matri" of the four variable!
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Fi$ure 4.2.2: Fertilit- rate #lotted a$ain!t <=( #er ca#ita and life e"#ectanc-. 4D E <=(F
ELife e"#ectanc-5 42.1 E re#lacement fertilit- rate5
4.3. E"#ected !i$n! of coefficient!
(t follow! from our economic model that an increa!e in the ,ualit- of healthcare. nutrition.
education and $eneral wealth re!ult! in a decrea!e in fertilit-. Since the model i! reci#rocal. the
ne$ative relation!hi# i! ca#tured b- #o!itive #arameter!. The interce#t however can a!!ume a
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ne$ative value. !ince the e,uation a!!ume! life e"#ectanc- and literac- to $row into infinit-.
The!e value! however are em#iricall- and lo$icall- limited to value! below 166.
4.4. The error term
The error term! ca#ture! all variable! that are not included in the model. Some of the!e
variable! mi$ht be difficult to ob!erve or are !#ecific to individual countrie! or other $rou#!.
The Ghite te!t !u$$e!t! that the error term! i! hetero!ceda!tic 4;##endi" 15.
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%. The &ata
The data i! !ourced from the Gorld 1an/ 4!ome literac- rate! from the @(; Gorld
Factboo/5. To have !ufficient data for all variable! and almo!t all li!ted countrie! the -ear 266'
ha! been u!ed a! reference -ear.
The Gorld 1an/ define! the data a! follow!:7Total fertilit- rate re#re!ent! the number of
children that would be born to a woman if !he were to live to the end of her childbearin$ -ear!
and bear children accordin$ to current a$e?!#ecific fertilit- rate!.8 4The Gorld 1an/. 2611a5
7The Life e"#ectanc- variable i! the e"#ected a$e a newborn would live if #revailin$
#attern! of mortalit- at the time of it! birth were to !ta- the !ame throu$hout it! life.8 4The
Gorld 1an/. 2611c5
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7<=( #er ca#ita 4formerl- <=P #er ca#ita5 i! the $ro!! national income. converted to H.S.
dollar! u!in$ the Gorld 1an/ ;tla! method. divided b- the mid-ear #o#ulation. 4...58 4The
Gorld 1an/. 2611b5
7The female adult literac- rate i! the #ercenta$e of #eo#le a$ed 1% and above who can. with
under!tandin$. read and write a !hort. !im#le !tatement on their ever-da- life.8 4The Gorld
1an/. 2611d5
The data !eem! com#lete for the cho!en -ear. The methodolo$-. accurac- could var- from
countr- to countr- and affect the overall ,ualit-. The number of ob!ervation! !hould cancel out
individual bia!ed element!. thu! ma/in$ it an acce#table !ource for $eneral and cautiou!
ob!ervation!.
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'. The E!timation and (nference Procedure
ILS ha! been cho!en a! the e!timation method. becau!e the economic model a!!ume! a liner
relation!hi# between the variable!.
The model ha! been te!ted for it! com#liance with the @la!!ical Linear Re$re!!ion Model
a!!um#tion!. The re!ult! are outlined in table '.1. The relevant dia$no!tic te!t can be reviewed
in the ;##endi". 3etero!ceda!ticit- doe! not invalidate the ILS method. but the model i! no
lon$er efficient 4<u0arati. 26635.
(n line with the <au!!?Mar/ov theorem and the re!ult! from the @LM; a!!um#tion!. ILS
ha! been cho!en becau!e of it i! a!!umed to be a be!t linear unbia!ed e!timator 41LHE5
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4<u0arati and Porter. 26165. 3owever a Gei$hted Lea!t S,uare! method would be #referable
but would re,uire to /now J
2
i
and would increa!e the com#le"it- 4<u0arati. 26635.
;!!um#tion Te!t Re!ult
Linear re$re!!ion model Model i! linear in the #arameter! I9
C value! are fi"ed in re#eated !am#lin$ Ither! -ear! have !imilar value! I9
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;!!um#tion Te!t Re!ult
3omo!ceda!ticit- ;##endi" 1 ? Ghite Te!t 3etero!ceda!tic at %K
!i$nificance level
=o autocorrelation between the di!turbance ui ;##endi" & ? &ubrin?Gat!on Te!t I9 ? (n the 7;cce#t 367
re$ion
Lero covariance between ui and Ci ;!!umed to be at acce#table level I9
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;!!um#tion Te!t Re!ult
More ob!ervation! than #arameter! Ib!ervation! 1)2 M 3 Parameter! D 1 (nterce#t I9
ariabilit- in C value! C value! are variable! I9
The re$re!!ion model i! correctl- !#ecified ;##endi" @ ? RESET Model incorrectl- !#ecified
at the %K !i$nificance level
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;!!um#tion Te!t Re!ult
There i! no #erfect multicollinearit- ;##endi" E ? (F I9 ? alue! below %
Table '.1: @LRM ;!!um#tion! a##lied to the demo$ra#hic tran!ition model
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'.1. Re$re!!ion Re!ult!
Model Summar-
b
Model R R
2
;d0u!ted R
2
Std. Error of the E!timate &urbin?Gat!on
1 .***
a
6.)** 6.)*4 6.)1%)32+ 1.+**
a. Predictor!: 4@on!tant5. reclnLiterac-. reclnLE. reclnPP<=(
b. &e#endent ariable: Fertilit- rate. total 4birth! #er woman5
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@oefficient!
a
Model Hn!tandardi>ed @oefficient! Standardi>ed @oefficient!
1 Std. Error 1eta t Si$.
1 4@on!tant5 ?22.1)% 1.*1* ?12.1+* 6.666
reclnLE *3.6)' +.112 6.%1+ +.11) 6.666
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reclnPP<=( 11.)*2 3.322 6.216 3.%4' 6.661
reclnLiterac- 1'.%)' 3.62+ 6.2'3 %.4)2 6.666
a. &e#endent ariable: Fertilit- rate. total 4birth! #er woman5
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Ai ... Fertilit- rate
B6 ... (nterce#t
C1i ... Life e"#ectanc-
C2i ... <=( #er @a#ita
C3i ... female literac- rate
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'.1.1. R
2
!i$nificance
To te!t for the !i$nificance of R
2
. we a!!ume the true R
2
to be 6.
3
6
: R
2
E 6. the re$re!!ion i! not !i$nificantF
3
1
: R
2
M 6. i! !i$nificantl- lar$er than 6 at the cho!en level of confidence
R
2
... R
2
from regression
n ... number of observations
k ... number of parameters including intercept
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@ritical F?alue 43dfNdf1'* Pr 1K5 E 3.**
26*.1%M3.** EM Ge re0ect 3
6
and acce#t 3
1
F R
2
i! !i$nificantl- different from 6 at the 1K
level.
'.1.2. @oefficient Si$nificance
@oefficient!
a
Model Hn!tandardi>ed @oefficient!
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1 Std. Error t Si$. @ritical t alue 1K &eci!ion
1 4@on!tant5 ?22.1)% 1.*1* ?12.1+* 6.666 3.6+6 re0ect 36
reclnLE *3.6)' +.112 +.11) 6.666 3.6+6 re0ect 36
reclnPP<=( 11.)*2 3.322 3.%4' 6.661 3.6+6 re0ect 36
reclnLiterac- 1'.%)' 3.62+ %.4)2 6.666 3.6+6 re0ect 36
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a. &e#endent ariable: Fertilit- rate. total 4birth! #er woman5
The e"#ected value of the coefficient! i! #o!itive. Ge u!e therefore a one tailed t?te!t. ;ll
coefficient! are !i$nificantl- lar$er than 6 at the 1K level.
3
6
: BE6
3
1
: BM6
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). The Em#irical Re!ult! and @onclu!ion!
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Fi$ure ).1: Predicted value! #lotted a$ain!t actual fertilit- value!. colour indicate! the
re!idualNerror
The model ha! a hi$h e"#lanator- #ower a! the ad0u!ted R
2
value of 6.)*4 !u$$e!t!. The
variable! are al!o all relevant at the 6.1K confidence limit a! their t?value! !u$$e!t.
).1. The Parameter!

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Ai ... Fertilit- rate
B6 ... (nterce#t
C1i ... Life e"#ectanc-
C2i ... <=( #er @a#ita
C3i ... female literac- rate
The interce#t of ?22.1)% children #er women ha! no inter#retation. !ince it would re,uire to
let all variable! $row to infinit-.
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The #roblem ari!e! from !ettin$ the a$e and literac- variable! e,ual to infinit-. ; more
meanin$ful interce#t can be calculated b- !ettin$ all variable! to their hi$he!t e"#ected value.
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Thi! new interce#t could be inter#reted a! the fertilit- rate that e"i!t! re$ardle!! of
im#rovement! in all variable!. Thi! value i! lower than e"#ected b- Mi//o 4266+5 but a !imilar
value ha! been ob!erved in the anal-!ed !am#le. 3on$ 9on$ 46.*+'5.
).2. (nter#retation of inver!e lo$ #arameter!
To reflect the decrea!in$ mar$inal effect on fertilit- at hi$her wealth. education and health
level! the variable! have been lo$$ed to re#re!ent a relative chan$e. The lin?lo$ $ive! an
ab!olute chan$e in the de#endent variable for a #ercenta$e increa!e in the e"#lanator- variable.
3owever the model i! reci#rocal and to a##l- the !ame rea!onin$ the inver!e relation!hi# mu!t
be ta/en into account.
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;n e"am#le !hall hel# to clarif-: an increa!e in life e"#ectanc- b- 1K. /ee#in$ all other
variable! con!tant. reduce! the fertilit- in ab!olute term! b- the followin$ amount.
- ... reduction in fertilit-
B ... Parameter
C ... ariable
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Fi$ure ).2.1: @ontour #lot of ab!olute chan$e in fertilit- for 1K increa!e in e"#lanator-
variable. 4-?a"i! ... Parameter 4Bn5F "?a"i! ... (nde#endent ariable. C
ni
5
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Fi$ure ).2.2: Plot of ab!olute chan$e in fertilit- for a 1K increa!e in life e"#ectanc- from 36
to 166 -ear!
;##l-in$ thi! e,uation to life e"#ectanc- we e"#ect a reduction of 6.6) children #er women
for an increa!e of 1K from 36 to 36.3 -ear! 4+6 to +6.+ -ear!. ?6.645.
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Fi$ure ).2.3: Plot of ab!olute chan$e in fertilit- for a 1K increa!e in female literac- 4e.$.
%6K to %6.%K5 from %6K to 166K
The !ame a##lie! to literac-. Thi! value however affect! the fertilit- rate to a le!!er de$ree
becau!e of it! lower factor 41'.%)'5.
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Fi$ure ).2.4: Plot of ab!olute chan$e in fertilit- for a 1K increa!e in <=( #er ca#ita 4e.$.
1.666O to 1.616O5 from 1.666O to %6.666O
Life e"#ectanc- !eem! to be the mo!t !i$nificant #redictor of a countr-2! fertilit- rate. Thi!
doe! not come a! a !ur#ri!e. !ince nutrition and health are a!!umed to be the mo!t im#ortant
factor! in the im#rovement of child !urvival. and accordin$ to the economic model thi!
im#rovement directl- affect! the fertilit- rate.
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).3. The &i!tribution
The model #redict! a di!tribution of fertilit- rate! that i! bia!ed toward! 2. (n realit- however
the fertilit- rate! are more di!tributed and !i$nificantl- more countrie! have value! below 1.%.
4!ee Fi$ure ).2.15.
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Fi$ure ).2.1: 3i!to$ram of actual and #redicted fertilit- rate!
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The model !eem! to over!tate the fertilit- at lower level! and vice ver!a. Thi! i! in #art due
to the model2! reci#rocal nature. (t could al!o be due to the omi!!ion of an im#ortant variable or.
a! !u$$e!ted b- the RESET te!t a wron$ functional model. The re!idual #lot 4fi$ure ).2.25
!tron$l- !u$$e!t!. that the Ghite?te!t wa! correct in #redictin$ hetero!ceda!ticit-. ;! ar$ued b-
<u0arati 426635 the Ghite te!t te!t! al!o for !#ecification error! and !u##ort! the RESET re!ult.
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Fi$ure ).2.2: Re!idual! #lotted a$ain!t actual and #redicted value!
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*. Po!!ible E"ten!ion! and Limitation! of the Stud-
The findin$! of thi! !tud- and the model are an effort to e"#lain the ne$ative relation!hi#
between im#rovement! in health. education and wealth and fertilit-. 3owever fertilit- ha! a
#otentiall- infinite number of factor! affectin$ it! develo#ment. The reader !hould therefore
a##l- the inter#retation cautiou!l-.
Thi! !tud- could be e"tended b- u!in$ more concrete data. !uch a! education outcome!
4P(S;5 in!tead of a $eneral literac- fi$ure! and b- amendin$ the functional form a! the RESET
te!t !u$$e!t!.
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+. ;##endi" ; ? Stati!tical Model Summer-
&e!cri#tive Stati!tic!
Mean Std. &eviation =
Fertilit- rate. total 4birth! #er woman5 2.+%1%24 1.%3+*2'4 1)2
reclnLE 6.23)* 6.66+'2 1)2
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reclnPP<=( 6.12+1 6.62)41 1)2
reclnLiterac- 6.232% 6.62441 1)2
Model Summar-
b
@han$e Stati!tic!
Model R R
2
;d0u!ted
R
2
Std. Error of
the E!timate
R
2
@han$e F
@han$e
df
1
df2 Si$. F
@han
$e
&urbin?
Gat!on
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1 .
***
a
6.)** 6.)*4 6.)1%)32+ 6.)** 26).*2% 3 1'* 6.666 1.+**
a. Predictor!: 4@on!tant5. reclnLiterac-. reclnLE. reclnPP<=(
b. &e#endent ariable: Fertilit- rate. total 4birth! #er woman5
;=I;
b
Bradford University -
Module Code: MAN2905M
Model Sum of S,uare! df Mean S,uare F Si$.
1 Re$re!!ion 31+.3+6 3 16'.4'3 26).*2
%
.666
a
Re!idual *'.6'2 1'* 6.%12
Total 46%.4%2 1)1
Bradford University - School of Management
Module Code: MAN2905M
a. Predictor!: 4@on!tant5. reclnLiterac-. reclnLE. reclnPP<=(
b. &e#endent ariable: Fertilit- rate. total 4birth! #er woman5
@oefficient!
a
Model Hn!tandardi>ed @oefficient!
1 Std. Error t Si$. @ritical t alue 1K &eci!ion
Bradford University -
Module Code: MAN2905M
1 4@on!tant5 ?22.1)% 1.*1* ?12.1+* 6.666 3.6+6 re0ect 36
reclnLE *3.6)' +.112 +.11) 6.666 3.6+6 re0ect 36
reclnPP<=( 11.)*2 3.322 3.%4' 6.661 3.6+6 re0ect 36
reclnLiterac- 1'.%)' 3.62+ %.4)2 6.666 3.6+6 re0ect 36
a. &e#endent ariable: Fertilit- rate. total 4birth! #er woman5
Bradford University - School of Management
Module Code: MAN2905M
16. ;##endi" 1 ? Ghite Te!t 49oen/er 1a!!ett Te!t5
Re$re!!ion model:
Ai ... Fertilit- rate
B6 ... (nterce#t
C1i ... Life e"#ectanc-
C2i ... <=( #er @a#ita
C3i ... female literac- rate
Ste# 1: Re$re!! and #rint the re!idual! 4e5 and #redicted A 4APRE5
Bradford University -
Module Code: MAN2905M
Ste# 2: S,uare re!idual!. e
2
Ste# 3: Run the au"iliar- re$re!!ion. Re$re!! A
PRE
on e
2
. 4al!o /nown a! 9oen/erP1a!!ett
Te!t 4<u0arati. 2663 41%55
Ste# 4: Ibtain R
2
from au"iliar- re$re!!ion
e
2
... !,uared re!idual
B6 ... (nterce#t
APre ... Predicted un!tandardi>ed alue!
Bradford University - School of Management
Module Code: MAN2905M
Model Summar-
Model R R S,uare ;d0u!ted R S,uare Std. Error of the E!timate
1 .1%%
a
6.624 6.61* 6.*6)22
a. Predictor!: 4@on!tant5. Hn!tandardi>ed Predicted alue
Bradford University -
Module Code: MAN2905M
Ste# 4: Ibtain R
2
from au"iliar- re$re!!ion
Ste# %: State
3
6
: nQR
2
R S
2
4at cho!en confidence limit5F no hetero!ceda!ticit-
3
1
: nQR
2
M S
2
F hetero!ceda!ticit-
n ... number of ob!ervation!
R
2
... R
2
from au"iliar- re$re!!ion
S
2
... S
2
!tati!tic
nQR
2
S
2
1)1Q6.624 S
2
4.164 S
2
Bradford University - School of Management
Module Code: MAN2905M
Ste# ': @om#are calculated S
2

value to critical S
2
F S
2
%K
E3.*41% R 4.164
Ste# ): &eci!ion: re0ect 3
6
. acce#t 3
1
. The model i! hetero!ceda!tic.
Bradford University -
Module Code: MAN2905M
11. ;##endi" @ ? RESET Te!t
Re$re!!ion model:
Ai ... Fertilit- rate
B6 ... (nterce#t
C1i ... Life e"#ectanc-
C2i ... <=( #er @a#ita
C3i ... female literac- rate
Ste# 1: Re$re!! and #rint the #redicted value. T
PRE
and R
2
old
Bradford University - School of Management
Module Code: MAN2905M
Model Summar-
b
@han$e Stati!tic!
Model R R
2
;d0u!ted
R
2
Std. Error of
the E!timate
R
2
@han$e
F @han$e df1 df2 Si$. F
@han
$e
&urbin?Gat!on
1 .***
a
6.)** 6.)*4 6.)1%)32+ 6.)** 26).*2% 3 1'* 6.666 1.+**
a. Predictor!: 4@on!tant5. reclnLiterac-. reclnLE. reclnPP<=(
b. &e#endent ariable: Fertilit- rate. total 4birth! #er woman5
Bradford University -
Module Code: MAN2905M
Ste# 2: com#ute T
PRE
2
and T
PRE
3
and include a! additional re$re!!or!
Ai ... Fertilit- rate
B6 ... (nterce#t
C1i ... Life e"#ectanc-
C2i ... <=( #er @a#ita
C3i ... female literac- rate
Bradford University - School of Management
Module Code: MAN2905M
Ste# 3: com#ute R
2
new

for new re$re!!ion
Model Summar-
b
@han$e Stati!tic!
Model R R
2
;d0u!ted
R
2
Std. Error of
the E!timate
R
S,uare
@han$e
F
@han$e
df1 df2 Si$. F
@han
$e
&urbin?
Gat!on
1 .*+2
a
6.)+' 6.)+6 6.)6%*++) 6.)+' 12+.%3' % 1'' 6.666 2.613
Bradford University -
Module Code: MAN2905M
a. Predictor!: 4@on!tant5. A3. reclnPP<=(. reclnLiterac-. reclnLE. A2
b. &e#endent ariable: Fertilit- rate. total 4birth! #er woman5
Ste# 4: @alculate F?value
Bradford University - School of Management
Module Code: MAN2905M
R
2
old ... R
2
from original regression
R
2
new ... R
2
auxiliary regression
n ... number of observations
nnr ... number of new regressors
np ... number of parameters in the new model
Bradford University -
Module Code: MAN2905M
@ritical F?alue for =umerator 2 and denominator 266 4neare!t value in table to 1''5
Pr 6.2%: 1.3+
Pr 6.16: 2.11
Pr 6.6%: 2.'%
Pr 6.61: 3.**
3
6
: FE6. model correctl- !#ecified
Bradford University - School of Management
Module Code: MAN2905M
3
1
: FM6. mole mi!!#ecified
Ste# %: @alculated F?value i! above critical F?!tati!tic. re0ect 3
6
of no mi!!#ecification and
acce#t 3
1
.
Bradford University -
Module Code: MAN2905M
12. ;##endi" & ? &urbin ?Gat!on
Ste# 1: calculate d value
Model Summar-
b
@han$e Stati!tic!
Bradford University - School of Management
Module Code: MAN2905M
Model R R
2
;d0u!ted
R
2
Std. Error
of the
E!timate
R
2
@han$e F
@han$e
df1 df2 Si$. F
@han$
e
&urbin?Gat!on
1 .
***
a
6.)*
*
6.)*4 6.)1%)32+ 6.)** 26).*2% 3 1'* 6.666 1.+**
a. Predictor!: 4@on!tant5. reclnLiterac-. reclnLE. reclnPP<=(
b. &e#endent ariable: Fertilit- rate. total 4birth! #er woman5
Bradford University -
Module Code: MAN2905M
Ste# 2: find critical d
L
and d
H
from !tati!tic table for !am#le !i>e and number of e"#lanator-
variable!
nE266F /E3:
Re0ect 3
6
no deci!ion ;cce#t 3
6
no deci!ion Re0ect 3
6
dL dH 2 4?dH 4?dL
1.'43 1.)64 2 2.2+' 2.3%)
Bradford University - School of Management
Module Code: MAN2905M
Ste# 3: do not re0ect 36 EM no autocorrelation
The &urbin Gat!on i! not a! relevant in cro!! !ectional anal-!i! a! it i! in time !erie! anal-!i!
Bradford University -
Module Code: MAN2905M
13. ;##endi" E ? ariance (nflation factor
@oefficient!
a
Model Hn!tandardi>ed
@oefficient!
Standardi>ed
@oefficient!
@ollinearit- Stati!tic!
1 Std.
Error
1eta t Si$. Tolerance (F
Bradford University - School of Management
Module Code: MAN2905M
1 4@on!tant5 ?22.1)% 1.*1* ?
12.1+
*
6.666
reclnLE *3.6)' +.112 6.%1+ +.11) 6.666 6.3+6 2.%'%
reclnPP<=( 11.)*2 3.322 6.216 3.%4' 6.661 6.3'1 2.)'+
reclnLiterac- 1'.%)' 3.62+ 6.2'3 %.4)2 6.666 6.%4* 1.*2'
a. &e#endent ariable: Fertilit- rate. total 4birth! #er woman5
Bradford University -
Module Code: MAN2905M
(F below !u$$e!ted critical level of %. (t i! at an acce#table level. which indicate! no
!i$nificant multicollinearit-.
Bradford University - School of Management
Module Code: MAN2905M
14. Reference!
1;R1ER. U. S. 426615 (deational influence! on the tran!ition to #arenthood: ;ttitude! toward
childbearin$ and com#etin$ alternative!. Social P!-cholo$- Vuarterl-. '4 425. 161 ?.
1RA;=T. U. 4266)5 Theorie! of Fertilit- &ecline and the Evidence from &evelo#ment
(ndicator!. Po#ulation and &evelo#ment Review. 33 415. 161?2).
<HU;R;T(. &. 426635 1a!ic econometric!. 1o!ton. WMa!!.X F London: Mc<raw?3ill.
Bradford University -
Module Code: MAN2905M
<HU;R;T(. &. =. and PIRTER. &. @. 426165 E!!ential! of econometric!. 1o!ton F London:
Mc<raw?3ill.
9(R9. &. 41++'5 &emo$ra#hic Tran!ition Theor-. Po#ulation Studie!. %6 435. 3'1?*).
LEE. R. 426635 The &emo$ra#hic Tran!ition: Three @enturie! of Fundamental @han$e. The
Uournal of Economic Per!#ective!. 1) 445. 1')?+6.
M(99I. M.. et al. 4266+5 ;dvance! in develo#ment rever!e fertilit- decline!. =ature. 4'6
4)2%'5. )41?43.
Bradford University - School of Management
Module Code: MAN2905M
T3E GIRL& 1;=9 42611a5 Fertilit- rate. total 4birth! #er woman5. The Gorld 1an/. Wcited
26 March 2611 ;vailable from
htt#:NNdata.worldban/.or$NindicatorNSP.&A=.TFRT.(=Ncountrie!.
T3E GIRL& 1;=9 42611b5 <=( #er ca#ita. ;tla! method 4current HSO5. The Gorld 1an/.
Wcited 26 March 2611 ;vailable from
htt#:NNdata.worldban/.or$NindicatorN=A.<=P.P@;P.@&Ncountrie!.
T3E GIRL& 1;=9 42611c5 Life e"#ectanc- at birth. total 4-ear!5. The Gorld 1an/. Wcited
26 March 2611 ;vailable from htt#:NNdata.worldban/.or$NindicatorNSP.&A=.LE66.(=.
Bradford University -
Module Code: MAN2905M
T3E GIRL& 1;=9 42611d5 Literac- rate. adult female 4K of female! a$e! 1% and above5.
The Gorld 1an/. Wcited 26 March 2611 ;vailable from
htt#:NNdata.worldban/.or$NindicatorNSE.;&T.L(TR.FE.LS.
Bradford University - School of Management