Report on Economic and Quantitative Analysis

ECONOMICS AND QUANTITATIVE
ANALYSIS

TABLE OF CONTENTS
PURPOSE........................................................................................................................................1
BACKGROUND.............................................................................................................................1
METHOD........................................................................................................................................1
RESULTS........................................................................................................................................2
Descriptive statistics....................................................................................................................2
Scatter diagram............................................................................................................................2
Regression Equation....................................................................................................................3
Slope coefficient..........................................................................................................................4
Association between GDP per capita and Average life satisfaction............................................4
Analysis of good fit......................................................................................................................4
Re-estimating regression model by excluding Luxembourg.......................................................4
DISCUSSION..................................................................................................................................5
RECOMMENDATIONS.................................................................................................................6
REFERENCES................................................................................................................................7

PURPOSE
The purpose of the report is to examine statistical association between average life
satisfaction and GDP per capita using different statistical tools and techniques.
BACKGROUND
Stevenson and Wolfers (2008), investigates relationship between GDP and life
satisfaction across number of countries and do not found any evidence of peak satisfaction
beyond which, wealtheri & developed nations report no further increase in their well-being.
Similarly, Degutis, Urbonavičius and Gaižutis (2010) found strong positive relation in GDP and
life satisfaction in Eastern European countries, but, it also follows same relation in other EU
nations.
However, in 2013, Proto and Rustichini (2013) assessed the relationship between GDP
and life satisfaction without using any functional form and country-specific factors. The study
discovered that countries with per capita GDP below 15,000 USD average life satisfaction score
follows direct association however, for richer countries, it remains flat. One of the interesting
findings about the study is that life satisfaction score peaks at 30,000 USD then shows slightly
increase but among extremely rich countries, it shows significant decline. Thus, it proven
Easterlin Paradox, as per which, in poor country, life satisfaction goes up with the increase in
GDP per capita but such relationship is flat in rich countries. Thus, due to inconsistent results,
the debate is still open and raise interest of economists to investigate such issue.
METHOD
It is decided to investigate the research issue across many countries, hence, 36 countries
with their average life satisfaction score and annual GDP per capita has been used to reassess the
relationship between both the factors. In order to make assessment of whether these factors
follows any relationship or not, multitude of statistical tests and tools like descriptive statistics,
linear regression, correlation coefficient and others had been used. In addition, in order to
represent the data set graphically, scatter diagram is presented to present their relationship.
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