# Growth Rate Slow Model (1992) Term Paper

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[. . .]
"According to the Bureau of Labor Statistics, labor productivity rose by 69% in the service-providing and mining industries in 2010, up from 42% in 2009. It is widely believed that research and development (R&D), patents, and management innovations have contributed to productivity growth in the U.S., while the diffusion of new technologies and their application in more firms and sectors will continue to boost Productivity." (MarketLine 2012 P. 22).

The increase in the country labor productivity assists the country competitiveness. Typically, the country labor productivity has grown steadily and translated into a sustainable economic expansion. Despite the country impressive labor force, the country is facing the problem of ageing population where the half of the population was more than 36.9 years in 2011.

Technology and accumulation of capital has been the cornerstone of an economic growth and the ICT (Information Communication Technology) remains the driving force of the U.S. economy making the country to enjoy rapid growth rate between 1990 and 2000. The significant development of human capital is due to the country well-established IRP (intellectual property rights).

B. Data Collection

The study collects data from the combination of World Bank World Development Indicators (WDI), OECD (Organization for Economic Cooperation and Development) and Country Watch (2012). The paper collects data of core variable and non-core variables between 2007 and 2012 to demonstrate their impacts on the U.S. economic growth.

The Table 1 reveals the Descriptive Statistics of the data collected.

Table 1: Descriptive Statistics

Trade Volume

GDP Growth Rate

Growth of Capital

Employment Growth

Labor Productivity

FDI

Mean

1,88

Mean

14,58333

Mean

2234,167

Mean

-0,12983

Mean

1,0515

Mean

267,6667

Standard Error

0,058878

Standard Error

0,283333

Standard Error

85,41874

Standard Error

0,746653

Standard Error

0,011862

Standard Error

29,46486

Median

1,9

Median

14,4

Median

Median

0,066

Median

1,052

Median

Mode

1,9

Mode

#N/A

Mode

#N/A

Mode

#N/A

Mode

#N/A

Mode

#N/A

Standard Deviation

0,144222

Standard Deviation

0,694022

Standard Deviation

209,2323

Standard Deviation

1,828919

Standard Deviation

0,029057

Standard Deviation

72,17386

Sample Variance

0,0208

Sample Variance

0,481667

Sample Variance

43778,17

Sample Variance

3,344943

Sample Variance

0,000844

Sample Variance

The results of regression analysis are presented in Table 2, 3, 4, 5, and 6. All the results of the regression analysis strongly support that the FDI, employment growth, trade volume, labor productivity and growth of capital improve the economic growth of the United States. The P-values of all these variables shows their positive impact on the U.S. economic growth. The economic theory supports the findings of regression analysis conducted which the reveals that increase of inflow of FDI into the United States, labor productivity, employment growth rate, growth of capital and increase in trade volume enhance the U.S. economic growth. However, the literatures support that inequality does not increase economic growth. (Temple, and Johnson, 1998).

Table 2: GDP Growth Rate and FDI

SUMMARY OUTPUT

Regression Statistics

Multiple R

0,088507

R Square

0,007833

Adjusted R. Square

-0,24021

Standard Error

0,772895

Observations

6

ANOVA

df

SS

MS

F

Significance F

Regression

1

0,018866

0,018866

0,031581

0,867586

Residual

4

2,389468

0,597367

Total

5

2,408333

Coefficients

Standard Error

t Stat

P-value

Lower 95%

Upper 95%

Lower 95,0%

Upper 95,0%

Intercept

14,35553

1,32015

10,87416

0,000406

10,6902

18,02085

10,6902

18,02085

X Variable 1

0,000851

0,004789

0,177711

0,867586

-0,01245

0,014148

-0,01245

0,014148

Table 3: Trade Volume and GDP Growth Rate

SUMMARY OUTPUT

Regression Statistics

Multiple R

0,715333

R Square

0,511701

Adjusted R. Square

-1,5

Standard Error

0,112676

Observations

1

ANOVA

df

SS

MS

F

Significance F

Regression

6

0,053217

0,008869

4,191699

#NUM!

Residual

4

0,050783

0,012696

Total

10

0,104

Coefficients

Standard Error

t Stat

P-value

Lower 95%

Upper 95%

Lower 95,0%

Upper 95,0%

Intercept

0

0

X Variable 1

0,511297

-1,08694

X Variable 2

-2E-285

5,2E-285

X Variable 3

8,8E+264

-9E+264

X Variable 4

-4E+196

3,9E+196

X Variable 5

-0,28782

1,059833

-0,27157

0,799392

-3,23039

2,654749

-3,23039

2,654749

X Variable 6

0,148651

0,072606

2,047364

0,110019

-0,05294

0,350237

-0,05294

0,350237

Table 4: Growth of Capital and GDP Growth Rate

SUMMARY OUTPUT

Regression Statistics

Multiple R

0,715333

R Square

0,511701

Adjusted R. Square

-1,5

Standard Error

0,542215

Observations

1

ANOVA

df

SS

MS

F

Significance F

Regression

6

1,232346

0,205391

4,191699

#NUM!

Residual

4

1,175987

0,293997

Total

10

2,408333

Coefficients

Standard Error

t Stat

P-value

Lower 95%

Upper 95%

Lower 95,0%

Upper 95,0%

Intercept

0

0

X Variable 1

0,511701

4

0,127925

0,904382

-10,5941

11,61748

-10,5941

11,61748

X Variable 2

5,25E+82

-5,2E+82

X Variable 3

5,54E-50

5,54E-50

X Variable 4

-8,79759

8,797592

X Variable 5

8,111795

3,168654

2,560013

0,062637

-0,6858

16,90939

-0,6858

16,90939

X Variable 6

3,442308

1,681336

2,047364

0,110019

-1,22583

8,110446

-1,22583

8,110446

Table 5: GDP Growth Rate and Growth of Capital

SUMMARY OUTPUT

Regression Statistics

Multiple R

0,924941

R Square

0,855516

Adjusted R. Square

-1,5

Standard Error

0,061291

Observations

1

ANOVA

df

SS

MS

F

Significance F

Regression

6

0,088974

0,014829

23,68464

#NUM!

Residual

4

0,015026

0,003757

Total

10

0,104

Coefficients

Standard Error

t Stat

P-value

Lower 95%

Upper 95%

Lower 95,0%

Upper 95,0%

Intercept

0

0

X Variable 1

-3,35654

7,135479

X Variable 2

-2E-285

5,2E-285

X Variable 3

4,9E+283

-5E+283

X Variable 4

-1,5E-61

1,53E-61

X Variable 5

1,88947

0,025098

75,28512

1,87E-07

1,819788

1,959152

1,819788

1,959152

X Variable 6

0,072938

0,014987

4,866687

0,008239

0,031327

0,114548

0,031327

0,114548

Table 5: GDP Growth Rate and Labor Productivity

SUMMARY OUTPUT

Regression Statistics

Multiple R

0,483936

R Square

0,234194

Adjusted R. Square

-1,5

Standard Error

0,141106

Observations

1

ANOVA

df

SS

MS

F

Significance F

Regression

6

0,024356

0,004059

1,223255

#NUM!

Residual

4

0,079644

0,019911

Total

10

0,104

Coefficients

Standard Error

t Stat

P-value

Lower 95%

Upper 95%

Lower 95,0%

Upper 95,0%

Intercept

0

0

X Variable 1

0,234194

4

0,058549

0,95612

-10,8716

11,33997

-10,8716

11,33997

X Variable 2

5E+134

-5E+134

X Variable 3

6,12E-66

6,12E-66

X Variable 4

-5E+156

-5E+156

X Variable 5

-0,64569

2,284336

-0,28266

0,791461

-6,98803

5,696643

-6,98803

5,696643

X Variable 6

2,40199

2,171764

1,106009

0,330764

-3,62779

8,431774

-3,62779

8,431774

D: Problem Encountered

The problem encountered in conducting regression analysis is that it is not possible to get the accurate data on income inequality in the United States since the income equality is not static. Thus, the study is unable to run regression on inequality.

E: Non-Stationarity

Analysis of all the variables used for the regression shows that they do not suffer from non-stationarity. Thus, the researcher is confident about the reliability of the results because the economic theory supports all the results of the regression analysis.

The policy implications of the findings shows that the United States needs to implement necessary measures to attract FDI into the country…
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