3 MC The following regressed gravitational equation is given

3. (MC) The following regressed gravitational equation is given Logarithmic trade between country i and j 80 = Intercept y Logarithmic GDP o country i Logarithmic GDP of country j dij - Logarithmic distance between i and j Uy = Dummy variable for simultaneous membership of i and j in a union Cy Dummy variable for colonial relationship of i and j Lij Dummy variable for same official language of i and j By Dummy variable for common border of 1 and J The following statement about the \'s is correct: (a) All \'s > 0 (b) All \'s= 1 (e) Ag

Solution

(3) The correct answer is option e which shows the coefficient of distance between the countries. Larger the distance lower will be the trade. Hence ₃ is negative.

(4)The correct answer is option b. Developing countries since 1980 have been exporting more agricultural products than industrial products.