IS THERE A RELATIONSHIP BETWEEN GDP PER

CAPITA AND FERTILITY RATE

INTRODUCTION
The aim of this IA is to find if there is any relationship between GDP per capita (independent
variable) and fertility rate (dependent variable). To find these, I will be using linear regression -
simple process to find the slope and to find out a rough idea on whether the correlation
between GDP per capita and fertility rate is positive or negative and how strong or weak it is.
However to find the exact value, I will be using a formula which determines the ‘r’ (further
process) also known as the correlation and its linear regression formula. Later on, I will use
chi-square to find out if the relationship between GDP per capita and fertility rate is
independent or not. I chose these two variables because I wanted to know what was the ideal
or common amount of child in a family between LEDCs and MEDCs.

SIMPLE PROCESS

Sample Raw Data:

Figure 1

This is a sample of raw data that is collected from The World Bank - fertility rate births per
woman and the GDP per capita from CIA World FactBook for 157 countries chosen randomly.

Linear Regression Line

Figure 2
​ is is a scatter plot representing the relationship between GDP per capita and fertility rate.
Th
There are several outliers but most countries with GDP less than approximately $5000 have a
fertility rate of more than 2.7, whereas countries with GDP more than $25000 have a fertility
rate below 2.7, mostly ranging around 1 to 2. The left sided slope indicates that the correlation
between the two variables is negative. This makes sense since the higher the GDP is, the lower
the fertility rate, while the lower the GDP, the higher the fertility rate.

FURTHER PROCESS
Calculation of “r” & Linear Regression Formula

Processed Data:
Fertility Rate births per
GDP - PER CAPITA (PPP) ( x ) woman ( y ) xy x2 y2
$139,100 1.4 194740.0 19348810000 1.96
$14,500 1.9 27550.0 210250000 3.61
$2,900 2.9 8410.0 8410000 8.41
$700 5.7 3990.0 490000 32.49
TOTAL:​ $3,410,300 446.6 6546210.0 173706430000 1579.22
Figure 3

n = 157 = ​21 722 = 2.8

This table is a sample raw data, where the highest, the lowest, upper range and lower range of GDP are
chosen. However, the total numbers for each columns include all the numbers from the data. The three
last columns on the left; xy, x^2 and y^2 are calculated since it is part of the r formula.

Formulas:
 Figure 3

This is the formula that will be used to calculate the correlation ​( r )

Steps to find the correlation (r):

GDP - PER CAPITA Fertility Rate births
(PPP) (x) per woman (y)
xy x2 y2
TOTAL: $3,410,300 446.6 6546210.0 173706430000 1579.22
Figure 4

By using the numbers above, the formula given to find the correlation will be used by
substituting the numbers with the data.

1
6546210− 157 (3410300)(446.6)
(3410300)2 )(1579.22− 157 (466.6)2 )
√
1 1
(173706430000 − 157

Therefore r (correlation) = - 0.7203621253 | - 0.720 (3 S.F.)

The negative symbol immediately dictates that the relationship is a negative correlation. The
value implies that the correlation is fairly strong, which means there is a definite correlation
between the two variables.

Now to find “m” for the equation y = mx + b this equation will be used:
 Figure 5

Using the equation above, the x and y values will be replaced with values on figure 4.

1
6546210− 157 (3410300)(446.6)
1
173706430000− 157 (3410300)2
Therefore m = − 3.16642693 × 10−5 or -3.17 (3 S.F.)

Now, to find “b”, the midpoint x and y which are 2

​ 1 722 and 2.8 respectively will be used.

Hence:
y = mx + b → 2.8 = − 3.16642693 × 10−5 (​21722) + b
= 2.8 = -0.6878112577 + b
= 2.8 + 0.6878112577 = b
= ​3.487811258 = b

Therefore the final formula (3 S.F.):

y = − 3.17x + 3.48

FURTHER PROCESS 2:
Chi-Square

1) The Hypotheses:
Null Hypothesis ( H o ) = GDP per capita and fertility rate birth per woman are not independent
Alternative Hypothesis ( H 1 ) = GDP per capita and fertility rate birth per woman are not independent

By the end of the chi-squared calculations, either one of the hypotheses will be the answer to the
relationship between the two variables.

2) Calculating Expected Values:

Before calculating the expected values, the raw datas have to be organized in the format:

OBSERVED VALUES
 LEDC MEDC TOTAL
x < 2.7 45 48 93
x ≥ 2.7 63 1 64
Total 108 49 157
Figure 6

This table shows the amount of countries that fall under LEDCs with fertility rate above or below the
mean and amount of countries that fall under MEDCs with fertility rate above or below the mean.

row total * column total

The expected value for each cell is calculated by:​ total

EXPECTED VALUES (rounded of to 3 SF)

LEDC MEDC TOTAL

x < 2.7 64.0 29.0 93

x ≥ 2.7 44.0 20.0 64

TOTAL 108 49 157

Figure 7

These are the expected values and they are the values that will be used to determine whether the
relation between the two variables are independent or otherwise.

3) Calculate the chi-square statistics

Now, we have to find out how far, on average, the OBSERVED DATA (f o ) DEVIATES FROM THE
EXPECTED DATA (f e ) . The value for this is the x2 (chi-squared) statistic.

To find the chi-squared statisyics, we need to find the summation of these values below:

(3 SF)
f o f e f o − f e (f o − f e )2 (f o − f e )2
fe

45 64.0 -19 361 5.64

48 44.0 4 16 0.364

63 29.0 34 1156 39.9

1 20.0 -19 361 5.64

Figure 8
Total: 51.544
The x2 statistic for this data is: 51.5

4) Degrees of freedom
This is the number of values in the final calculation of a statistic that are free to vary.

To calculate this, the formula that needs to be used is: (r − 1)(c − 1) where r is the number of rows and c
is the number of columns.

So in this case → (2 − 1) (2 − 1) = 1 Therefore the degree of freedom is 1.

5) Identify the significance level

Before analysing chi square, a percentage error has to be decided. A significance level of 0.05 means
that 5% of the error which may be present in the final result will be accepted, while 95% is expected to
be correct.

For this case, a significance level of 5% will be used.

6) Finding the critical value

Figure 9

Since the degrees of freedom is one and significance level of 5% is chosen, the critical value is ​3.84​.

7) Conclusion

Rules:
■ If the calculated value is lesser than the critical value than do not reject the H o
■ If the calculated balue is greater than the critical value than reject the H o
The calculated value (chi-square) is ​51.5 ​and the criticial value is ​3.84 ​which means
x2 calculated > x2 critical so that means we reject the null hypothesis.

So overall, there is a relationship between GDP per capita and fertility rate birth per woman.

CONCLUSION:
Overall, there is indeed a correlation and a relationship between the two variables and the relationship
is that the higher the GDP, the lower the fertility rate while the lower the GDP, the higher the fertility
rate. This implies that people from higher income countries tend to give birth to less children because it
is extremely expensive to raise kids in developed countries and the parents are also more focused on
their careers. However on the other hand, in lower income countries, people tend to give more birth to
children because they need them for agricultural work since these countries have primary sector as their
main source of economy. Therefore this indicates that if a country becomes richer, people will shift
more towards tertiary sector due to higher salary and due to this, they do not need children to support
agricultural works.

Bibliography:
https://data.worldbank.org/indicator/SP.DYN.TFRT.IN?year_high_desc=true
https://www.cia.gov/library/publications/the-world-factbook/rankorder/2004rank.html