Econometrics report analyzing the dependency of economic growth on the social factors in european union from 2011 to 2021

ABSTRACT 1 1. INTRODUCTION 2 2. LITERATURE REVIEW 4 2.1. Social factors and social factor indicators 4 2.2. Theoretical perspective on the relationship between Social Factors and Economic growth 5 2.3. Empirical Studies on the Relationship between Social Factors and Economic Growth 6 2.4. Research gap 7 2.5. Research hypothesis 7 3. MODEL SPECIFICATION AND DATA 9 3.1. Methodology 9 3.1.1. Method used to collect data 9 3.1.2. Method used to analyze data 9 3.2. Empirical Model 9 3.2.1. Model Specification 9 3.2.2. Variables Description 10 3.3. Data 13 4. STATISTIC DESCRIPTION OF VARIABLES 14 4.1. Description Statistics and Interpretation for each variable 14 4.2. Correlation matrix between variables 15 5. QUANTITATIVE ANALYSIS 18 5.1. Model selection Testing 18 5.2. Model defect identification 19 5.2.1. Multicollinearity Test 19 5.2.2. Heteroskedasticity Test 20 5.2.3. Test the autocorrelation of model 21 5.2.4. Test for crosssection correlation 21 5.3. Remedy model defect 22 6. CONCLUSION 25 REFERENCE 27 APPENDIX 31

https://tailieuluatkinhte.com/ FOREIGN TRADE UNIVERSITY FACULTY OF INTERNATIONAL ECONOMICS - ECONOMETRICS MIDTERM ASSIGNMENT TOPIC: ANALYZING THE DEPENDENCY OF ECONOMIC GROWTH ON THE SOCIAL FACTORS IN EUROPEAN UNION FROM 2011 TO 2021 Class: KTEE318 Lecturer: Dr Dinh Thanh Binh GROUP: Hanoi, June 2023 https://tailieuluatkinhte.com/ ABSTRACT 1 INTRODUCTION 2 LITERATURE REVIEW .4 2.1 Social factors and social factor indicators 2.2 Theoretical perspective on the relationship between Social Factors and Economic growth .5 2.3 Empirical Studies on the Relationship between Social Factors and Economic Growth .6 2.4 Research gap .7 2.5 Research hypothesis MODEL SPECIFICATION AND DATA 3.1 Methodology .9 3.1.1 Method used to collect data 3.1.2 Method used to analyze data 3.2 Empirical Model 3.2.1 Model Specification 3.2.2 Variables Description 10 3.3 Data 13 STATISTIC DESCRIPTION OF VARIABLES 14 4.1 Description Statistics and Interpretation for each variable 14 4.2 Correlation matrix between variables 15 QUANTITATIVE ANALYSIS 18 5.1 Model selection Testing 18 5.2 Model defect identification .19 5.2.1 Multicollinearity Test 19 5.2.2 Heteroskedasticity Test .20 5.2.3 Test the autocorrelation of model 21 5.2.4 Test for cross-section correlation 21 5.3 Remedy model defect 22 https://tailieuluatkinhte.com/ CONCLUSION 25 REFERENCE .27 APPENDIX 31 https://tailieuluatkinhte.com/ ABSTRACT This research aims to analyze the dependency of economic growth on social factors within the European Union from 2011 to 2021 using quantitative methods The study utilizes data from reputable sources such as the World Bank and Eurostat The social factors examined include the poverty rate, life expectancy, expected years of schooling, and unemployment rate Through econometric analysis, the study identifies the relationships between these social factors and economic growth, providing valuable insights for policymakers The findings emphasize the significance of addressing poverty, enhancing human development, promoting education, reducing income inequality, improving healthcare, and addressing unemployment to foster sustainable and inclusive economic growth The study acknowledges limitations such as potential data biases and the narrow focus on the European Union during a specific time period Recommendations for future research include incorporating qualitative methods, exploring additional variables, and extending the analysis to other regions and timeframes By implementing evidence-based policies derived from this research, policymakers can contribute to the advancement and prosperity of the European Union as well as ROW https://tailieuluatkinhte.com/ INTRODUCTION Social factors and economic development are intricately linked, with social factors playing a pivotal role as important backbones of economic growth and development According to Méndez-Picazo et al.,2021, social factors can stimulate economic activities that can lead to sustainable development Social factors serve as crucial foundations that influence individuals' decisions regarding employment, housing, education, health, and personal growth, which hold significant importance in their lives However, certain social factors are found to exert adverse effects on economic growth These encompass indicators such as poverty rates, hunger, crime rates, and environmental degradation, which can impede the progress and prosperity of a society According to Popa (2012), poverty and unemployment rates provide a negative relationship between economic growth based on the study conducted in Romania and among European countries Over time, the concept of economic development and its factors has changed drastically Traditionally, economic development centered on the enhancement of welfare, as indicated by the growth rate and per capita GDP However, the scope of economic development has broadened to encompass social dimensions such as poverty alleviation, improved education and healthcare, and more equitable income distribution The long-term perspective on economic development also emphasizes sustainability, ensuring that present advancements not compromise the ability of future generations to meet their own needs Popa (2012) argued that it is imperative to recognize the significance of various social factors and their economic implications Méndez-Picazo et al (2021) also suggested that it is necessary to introduce additional variables that capture the relevance of social factors Realizing the significance of analyzing the relationship between economic growth and various social factors in the EU, this research focuses on “Analyzing the dependency of economic growth on the social factors in the European Union from 2011 to 2021” The purpose of this research is to investigate the impact of various social factors on economic growth of 27 countries of the EU in the period of 2011-2021, shedding light on the intricate interplay between these domains and providing insights into potential drivers and barriers to growth within the region In this research, indicators including poverty rate, expected years of https://tailieuluatkinhte.com/ schooling, life expectancy, and unemployment rate are used to represent the social factors By focusing on this specific time frame, this research aims to capture the effects of social factors on economic growth and identify any temporal patterns or shifts in their relationship over the past decade We collect secondary data sources from OECD, Eurostat, UNDP and employ panel regression analysis to answer the research question “Do indicators for social factors have a positive or negative effect on economic growth in the EU from 2011 to 2021?” This research has the following structure.: The first section is the introduction followed by section 2, which will cover the literature review, overview of theories about social factors, economic growth, and previous research Section will provide the methodology and model specification Statistical description of variables will be discussed in section Based on quantitative analyses about model selection testing as well as model defect identification and remedies in section 5, we can propose some recommendations toward the topic in the final section During the process of doing this thesis, we can figure out many conclusions regarding the effects of chosen variables However, limitations are inevitable Thus, we hope to receive your comments and feedback on our work so that we can better our thesis We’d like to thank Mrs Dinh Thanh Binh for your dedication and careful guidance for us throughout the course https://tailieuluatkinhte.com/ LITERATURE REVIEW 2.1 Social factors and social factor indicators Social factors refer to the various aspects of society that influence individuals' wellbeing, behavior, and interactions These factors play a crucial role in shaping economic, political, and cultural landscapes, and have major impact on development outcomes, including economic growth (Harrison & Huntington, 2001) The citizens of a country can become valuable human capital resources that contribute to economic growth and development when they receive social benefits that motivate them to be more productive (Langelett, G., 2002) Social factors, which encompass noneconomic variables affecting citizens' living standards, are influenced by complex interplay between genetic and environmental factors (McGowan et al., 2014) Many countries allocate budgetary resources for these social factors, including institutions focusing on population, health, education, labor, development, environment, national security, and other social issues These investments are important components of public finance decisions, ensuring the social well-being of citizens and fostering effective human capital that embodies physical capacities and human values Failure to invest in social development results in missed opportunities for citizens to improve their living standards and social conditions, and may even lead to economic decline, social unrest, and negative cultural outcomes such as gambling, drug abuse, alcoholism, and lack of skills due to inadequate training and education Social factors significantly shape citizens' choices regarding employment, housing, education, health, and personal growth For instance, a healthy population leads to increased productivity and reduced household spending on healthcare An educated population has greater employment opportunities and income potential Reducing unemployment stimulates the market and increases the demand and supply of goods and services (Méndez-Picazo et al., 2021) When citizens are secure and healthy, they actively participate in the provision of goods and services, fostering development, entrepreneurship, and market opportunities Overall, citizens contribute to national taxes when they receive various social benefits, providing the government with more resources to enhance social and developmental projects Consequently, a positive https://tailieuluatkinhte.com/ relationship between social factors and economic development is expected In contrast, some social factors have a negative impact on economic growth Popa and Ana - Maria (2012) conducted a study in Romania and other European Union states to explore the relationship between economic growth and social determinants The findings revealed that certain social factors, such as life expectancy and years of schooling, showed a positive correlation with economic growth On the other hand, variables like the unemployment rate and poverty risk were found to have a negative correlation with economic growth 2.2 Theoretical perspective on the relationship between Social Factors and Economic growth Economic growth refers to an increase in the production of goods and services over time, typically measured using indicators such as gross national product (GNP) or gross domestic product (GDP) In this study, real GDP per capita will serve as a variable to represent economic growth, which provides a measure of the value of output per person, serving as an indirect indicator of per capita income (World Bank, 2010) Human Capital Theory (HCT) provides insights into the relationship between education, human capital development, and economic growth According to Theodore Schultz (1961), education plays a crucial role in the development of human capital Through education, individuals acquire knowledge, skills, and abilities that enhance their productivity and contribute to economic growth Gary Becker (1994) further emphasized the impact of education on economic growth He argued that investments in education lead to higher levels of human capital, which in turn drive productivity, innovation, and economic development Based on HCT, human capital, which encompasses personal attributes such as habits, knowledge, and social and personality attributes, plays a vital role in producing economic value (Breton, 2014) It asserts that humans are essential components alongside physical capital, as their intellectual capacity enables countries and firms to achieve goals, foster growth, and promote innovation Furthermore, this study expands the scope by integrating national social factors and positing that if every country's https://tailieuluatkinhte.com/ citizens can benefit from other social factors, it can lead to economic growth Although social development requires substantial public expenditure in the short-term, investing in human capital yields long-term economic growth and development (Alawamleh et al., 2019) For example, improved education and health lead to longer life expectancy, resulting in higher productivity and lower depreciation of human capital assets Additionally, individuals with enhanced human capital can generate income, meet their basic needs, and reduce extreme poverty and hunger According to neoclassical growth theory, an increase in capital and labor inputs can contribute to economic growth, as both factors are involved in the production process (Solow, 1956) Furthermore, capital and labor are complementary factors, and their combined contribution enhances overall productivity (Jorgenson & Griliches, 1967) However, the impact of capital and labor on economic growth depends on the quality of these inputs and the efficiency of the production process (Mankiw, Romer, & Weil, 1992) Overall, human capital development positively influences economic growth by fostering new ideas, technological innovations, expertise, and an improved labor force (Pradhan & Abraham, 2002) By considering these perspectives, policymakers and researchers can gain a deeper understanding of the mechanisms through which social factors influence economic growth 2.3 Empirical Studies on the Relationship between Social Factors and Economic Growth Research “The impact of social factors on economic growth: Empirical evidence for Romania and European Union countries” (2012) of Popa and Ana - Maria, examined the changes in the social and economic environment worldwide and establishes a clear connection between human development and economic well-being The study utilized an econometric analysis performed using panel data consisting in annual data extracted from 2005-2009 for EU countries The model had a dependent variable - real GDP per capita (indicator for economic growth) and independent variables representing social factors: expected years of schooling, life expectancy, population at risk of poverty and unemployment rate The findings of the research demonstrate a https://tailieuluatkinhte.com/ positive correlation between certain social factors (independent variables: expected years of schooling and life expectancy) and economic growth (dependent variable) Conversely, there is a negative correlation between other social factors (such as the population at risk of poverty and the unemployment rate) and economic growth Gerry O Gatawa conducted research “The Effect of Social Factors to Economic Growth” (2022) and stated that social factors play a crucial role in driving economic growth and can lead to tangible benefits that promote sustainable development The study analyzed the impact of social factors on economic growth by conducting a time series analysis involving 58 countries and 290 data points spanning the period from 2014 to 2018 Through correlation and regression analyses, the research reveals significant relationships between social factors, including population, health, education, development, labor force, environment, military, and geography, and various indicators of economic growth such as GDP, GDP growth, GDP-per-capita, GNI, GNI-per-capita, manufacturing, and tourism The findings highlight the significant influence of social factors on economic growth outcomes 2.4 Research gap The main problem of the related research is the -year limit of the database of the social factor indicators This could be insufficient for macroeconomic factors to provide a precise evaluation for the real GDP per capita in the researched nations Another problem related to the theories is that the independent variables and control variables in the model are from different papers, which means that this study will cover more broadly the economic growth Therefore, the result of the new regression model could be ensured in terms of accuracy rate and might differ from the result of these mentioned papers 2.5 Research hypothesis Based on the point of view of other scholars on economic growth, all the variables representing social factors such as expected years of schooling, life expectancy, poverty rate and unemployment rate are believed to have an impact on economic growth To be more specific, expected years of schooling and life expectancy are expected to have a positive impact on economic growth, which has been represented