Research Method : Regression Model on the GDP of Sri Lanka
To determine the impact of economic growth or GDP in the Sri Lanka, a simple econometric framework was adopted by Abaid (2013), where in his study the function model which he derived from production function framework:
Where: Y denotes the estimated output level of the Gross Domestic Product (GDP) per capita growth. The L denotes the amount of labor force of the country and the K denotes the domestically financed capital stock-proxied bt the Gross Capital Formation (GCF). A constant technology assumed for this model so that the increased in labor or capital will increase the output. In extension of the production function, foreign financed capital (I), export (EX) and import (IM) are added into the model to determine their impact on the economic growth. Pawlos (2002) mentioned that the import is considered will affect the economic growth which are divided into intermediate and capital good imports. Balasubramanyam (as cited in Abaid, 2013) include FDI as the addition input to labor and domestic capital in production function since it’s the main source of human capital and new technology for new developing country. As mentioned by Anyamele (as cited in Abaid, 2013), exports are included in the production function as more input of macro are needed. The FDI stock was excluded from the Gross Capital Formation as it included both domestic and foreign investment and to avoid double measurement (Abaid, 2013)
The production function extended, assuming multiple-linear equation, an Ordinary Least Squared estimate which specified below:
Where = The estimated Gross Domestic Product per capita growth (annual %). = The Investment in terms of Gross Fixed Capital formation (% of GDP). = The Labor force in terms of total (person). = The Export of goods and services (% of GDP). = The Import of goods and services (% of GDP). = The Gross Capital Formation (% of GDP). = The error term of the regression. In the research done by Basu, Chakraborty and Reagle (as cited in
Where: Y denotes the estimated output level of the Gross Domestic Product (GDP) per capita growth. The L denotes the amount of labor force of the country and the K denotes the domestically financed capital stock-proxied bt the Gross Capital Formation (GCF). A constant technology assumed for this model so that the increased in labor or capital will increase the output. In extension of the production function, foreign financed capital (I), export (EX) and import (IM) are added into the model to determine their impact on the economic growth. Pawlos (2002) mentioned that the import is considered will affect the economic growth which are divided into intermediate and capital good imports. Balasubramanyam (as cited in Abaid, 2013) include FDI as the addition input to labor and domestic capital in production function since it’s the main source of human capital and new technology for new developing country. As mentioned by Anyamele (as cited in Abaid, 2013), exports are included in the production function as more input of macro are needed. The FDI stock was excluded from the Gross Capital Formation as it included both domestic and foreign investment and to avoid double measurement (Abaid, 2013)
The production function extended, assuming multiple-linear equation, an Ordinary Least Squared estimate which specified below:
Where = The estimated Gross Domestic Product per capita growth (annual %). = The Investment in terms of Gross Fixed Capital formation (% of GDP). = The Labor force in terms of total (person). = The Export of goods and services (% of GDP). = The Import of goods and services (% of GDP). = The Gross Capital Formation (% of GDP). = The error term of the regression. In the research done by Basu, Chakraborty and Reagle (as cited in