PREDICTING GROSS DOMESTIC PRODUCT
HOW CAN WE PREDICT THE GROSS DOMESTIC PRODUCT (GDP) OF A STATE? Gyasi Bawuah
Abstract
The object of this project was to look at a predictability model for Gross Domestic Product (GDP), and to evaluate whether or not the proposed minimum wage increase by the US government would automatically increase GDP as analysts have stated. The study examined all the states in the US with emphasis on their minimum wages, unemployment rates, population sizes, and state/local spending. All the factors were found to have varying positive relationships with productivity, however, not all were found to be statistically significant at .05 level of significance. A multi-collinearity test proved that the Population and S/L spending which defined the model of this study, did not affect each other (VIF= 0.01 ), and hence, were valid. The conclusion was that variations in Gross Domestic Product (GDP) can best be explained or predicted up to 96% by an association of population and State/Local spending in the following model: GDP = - 3.15 + 0.000001 POPULATION + 0.898 S/L SPENDING.
And that, minimum wage alone or unemployment rates alone were statistically inadequate in predicting Gross Domestic Product (GDP)
Introduction and Literature Review
The Bureau of Economic Analysis of the US Department of Commerce define Gross Domestic Product as the output of goods and services produced by labor and property. They have explained that GDP decreased at an annual rate of 0.1 percent in the fourth quarter of 2012 (that is, from the third quarter to the fourth quarter), and increased in the third quarter by 3.1 percent.
They attribute the decrease in real GDP in the fourth quarter primarily to negative contributions from private inventory investment, federal government spending, and exports that were partly offset by positive contributions from personal consumption expenditures (PCE),
Abstract
The object of this project was to look at a predictability model for Gross Domestic Product (GDP), and to evaluate whether or not the proposed minimum wage increase by the US government would automatically increase GDP as analysts have stated. The study examined all the states in the US with emphasis on their minimum wages, unemployment rates, population sizes, and state/local spending. All the factors were found to have varying positive relationships with productivity, however, not all were found to be statistically significant at .05 level of significance. A multi-collinearity test proved that the Population and S/L spending which defined the model of this study, did not affect each other (VIF= 0.01 ), and hence, were valid. The conclusion was that variations in Gross Domestic Product (GDP) can best be explained or predicted up to 96% by an association of population and State/Local spending in the following model: GDP = - 3.15 + 0.000001 POPULATION + 0.898 S/L SPENDING.
And that, minimum wage alone or unemployment rates alone were statistically inadequate in predicting Gross Domestic Product (GDP)
Introduction and Literature Review
The Bureau of Economic Analysis of the US Department of Commerce define Gross Domestic Product as the output of goods and services produced by labor and property. They have explained that GDP decreased at an annual rate of 0.1 percent in the fourth quarter of 2012 (that is, from the third quarter to the fourth quarter), and increased in the third quarter by 3.1 percent.
They attribute the decrease in real GDP in the fourth quarter primarily to negative contributions from private inventory investment, federal government spending, and exports that were partly offset by positive contributions from personal consumption expenditures (PCE),