Management

2.6 (a) Plot the index of corruption against per worker GDP.

We put the data of Table 2.15 in Eviews8 to plot the index of corruption against per worker GDP and get the result:

(b) Based on this plot what might be an appropriate model relating corruption index to per worker GDP?

We think that a slightly nonlinear model might be appropriate in this case, as we can that the index of corruption is increasing at decreasing rate following to the increasing worker GDP.

(c) Present the results of your analysis.

We put the data of Table 2.15 in Stata and get the results:

As we can see the result above, the positive sign of the coefficient of gdp_cap (0.0003182) combined with the negative sign of the coefficient of gdp_cap2 (-4.33e-09) causes the index of corruption increasing at decreasing rate following to the increasing worker GDP (shown in result of 2.6 (a)). Therefore, we think that the second-degree polynomial regression model: corruption = 2.845553 + 0.0003182*gdp_cap + -4.33*10^-9*gdp_cap^2 +ui is suitable for this case.

(d) If you find a positive relationship between corruption and per capita GDP, how would you rationalize this outcome?

Assuming that I can find a positive relationship between corruption and per capita GDP, I would very happy because of its results. About the outcome, I definitely would develop and maintain the relationship between them. Making more profit and be happy all the time.