Course: Basic econometrics 11/6/2024

Name: Muuse maxamed diiriye ID: B8EC810

Title: The impact of female wages and fertility rates on life expectancy

1. Introduction
i. Abstract

This article examines the intricate relationship between wages, fertility rates, and their combined effect on
life expectancy. While each of these variables is influential in its own right, their interplay holds significant
implications for demographic trends, socio-economic development, and public health outcomes. Drawing
upon empirical evidence and theoretical frameworks, we explore how variations in wages and fertility rates
shape life expectancy, and conversely, how changes in life expectancy influence wage dynamics and
fertility behaviors. Through a multi-disciplinary approach, we aim to elucidate the complex mechanisms
underlying these relationships and provide insights for policymakers, researchers, and practitioners seeking
to promote population health and sustainable development.

ii. Background

Life expectancy, a fundamental indicator of population health and societal well-being, is influenced by a
myriad of factors, including socio-economic conditions, healthcare access, and lifestyle choices. Among
these determinants, wages and fertility rates emerge as key drivers, exerting both direct and indirect effects
on life expectancy. While wages reflect economic prosperity and access to resources, fertility rates shape
population dynamics and dependency ratios. Moreover, the interplay between these variables adds a layer
of complexity, as changes in one may cascade across the others, ultimately influencing life expectancy
outcomes.

The Effect of Wages on Life Expectancy:

Wages play a crucial role in determining living standards, access to healthcare, and overall quality of life.
Higher wages often correlate with better health outcomes, as individuals with greater economic resources
can afford healthier diets, housing, and medical care. Moreover, wages influence lifestyle choices and
 behaviors, including smoking, exercise, and stress management, which in turn impact longevity. However,
the relationship between wages and life expectancy is not solely linear; disparities in wages, income
inequality, and access to healthcare services can exacerbate health inequalities and widen life expectancy
gaps within populations.

The Effect of Fertility Rates on Life Expectancy:

Fertility rates, representing the average number of children born to women of childbearing age, also exert
a significant influence on life expectancy. Historically, high fertility rates have been associated with shorter
life expectancies, as larger family sizes strain resources, increase maternal mortality rates, and limit
educational opportunities for children. Conversely, declining fertility rates, often observed during
demographic transitions, are accompanied by improvements in maternal and child health, increased
investments in education and healthcare, and ultimately, higher life expectancies. However, excessively
low fertility rates may pose challenges for population aging and sustainability, necessitating policy
responses to support aging populations.

iii. Objectives

1. To explore the relationship between wage and expectancy life .

2. Investigate the association between fertility rates and life expectancy.
3. Analyze the interaction between wages/salaries, fertility rates, and life expectancy life to gether.
iv. Research hypothesis
the hypotheses and decision rules using the t-test for the individual-level and the F-test for the overall-level:
Individual-level hypotheses:
H0: b2 = 0 (Wages have no effect on individual life expectancy)
H1: b2 ≠ 0 (Wages have an effect on individual life expectancy)
H0: b3 = 0 (Fertility rate has no effect on individual life expectancy)
H1: b3 ≠ 0 (Fertility rate has an effect on individual life expectancy)
Overall-level hypotheses:
H0: B2 = B3 = 0 (Wages and fertility rate have no effect on overall life expectancy)
H1: At least one of B2 or B3 is not equal to 0 (Wages and/or fertility rate have an effect on overall life
expectancy)
For the individual-level hypotheses:
• Calculate the test statistic for b2 as t = b2 / SE(b2) = 0.360553 / 0.178060 = 2.02
• Calculate the test statistic for b3 as t = b3 / SE(b3) = -3.264632 / 1.215759 = -2.68
• Compare the test statistics to the critical value of 1.721 at the 0.1 significance level.
• If the absolute value of the test statistic is greater than the critical value, reject the null hypothesis.
For the overall-level hypotheses:
• The given F-statistic is 87.88525.
• Compare the F-statistic to the critical value of 3.49.
• Since the F-statistic (87.88525) is greater than the critical value (3.49), reject the null hypothesis.
The decision rule is as follows:
 • For the individual-level hypotheses:
• Since the t-statistic (2.02, 2.68) is greater than the critical value = 1.721 reject the null hypothesis
(B2=0 or B3=0)
• For the overall-level hypotheses:
o Since the F-statistic (87.88525) is greater than the critical value (3.49), reject the null
hypothesis (B2 = B3 = 0).
The significance level of 0.1 and the critical values of 1.721 (t-test) and 3.49 (F-test) are used to determine
the statistical significance of the regression coefficients. Based on the given F-statistic of 87.88525, which
is greater than the critical value, the null hypothesis (B2 = B3 = 0) is rejected, indicating that at least one
of the wages or fertility rate has a significant effect on overall life expectancy.
2. Methodology
I. Data description:
a. The data used in this analysis is secondary data obtained from the World Bank's World
Development Indicators (WDI) database.
b. The data covers a large sample of countries and includes information on wages, fertility
rate, and life expectancy.
c. The data is collected by the World Bank using established survey methods and quality
control procedures to ensure the reliability and validity of the information.
II. Variable description:
Variable Description Source

Life Expectancy - The average number of years a person is expected to World Bank
LE
live. (WDI)

World Bank
W Wages - The average income earned by individuals in the population.
(WDI)

Fertility Rate - The average number of children born per woman in the World Bank
FR
population. (WDI)

III. Model:
a. The analysis employs a multiple linear regression model with the log of the independent
variables:
LE = β1+ β2 * log(W) -β3 * log(FR) + ε
b. The coefficients β2 and β3 represent the expected change in life expectancy associated with
a one-percent change in wages and fertility rate, respectively, while holding the other
variable constant.
IV. Methods:

o we the Ordinary Least Squares (OLS) method to estimate the regression coefficients
Hypothesis Testing
 3. Results and interpretation
I. Descriptive statistics

LIFE_EXPE... FERTILITY_... WAGE_AND...

Mean 54.65029 7.133125 30.40649
Median 53.24200 7.278000 30.69156
Maximum 59.09200 7.632000 35.79677
Minimum 51.97600 6.202000 25.57629
Std. Dev. 2.661036 0.446158 3.046283
Skewness 0.364239 -0.739848 -0.075354
Kurtosis 1.420804 2.265024 1.748103
Jarque-Bera 3.024540 2.729693 1.589959
Probability 0.220409 0.255420 0.451591
Sum 1311.607 171.1950 729.7558
Sum Sq. Dev. 162.8656 4.578313 213.4363
Observations 24 24 24
interpretation about this data

•⁠⁠ he mean life expectancy of 54.65 years indicates that on average, people in this population live around
T
54-55 years.

•⁠ ⁠The median of 53.24 years is slightly lower than the mean, suggesting a slight right-skew in the
distribution.

•⁠ ⁠The range of 51.98 to 59.09 years indicates a fairly wide spread in life expectancies, with some individuals
living significantly longer than others.

•⁠ ⁠The standard deviation of 2.66 years suggests moderate variability in life expectancies within the
population.

•⁠ ⁠The positive skewness and kurtosis values indicate the distribution has a slightly longer right tail and is
flatter than a normal distribution.

•⁠ ⁠The mean fertility rate of 7.13 children per woman is relatively high, indicating a population with high
birth rates.

•⁠ ⁠The median of 7.28 is slightly higher than the mean, suggesting a slight left-skew in the distribution.

•⁠ ⁠The range of 6.20 to 7.63 children per woman indicates a narrower spread in fertility rates compared to
life expectancy.

•⁠ ⁠The low standard deviation of 0.45 children per woman suggests little variability in fertility rates within
the population.

•⁠ ⁠The negative skewness and high kurtosis indicate a distribution that is slightly left-skewed and more
peaked than a normal distribution.
•⁠The mean wage and salary income of 30.41 suggests a relatively low income level on average.

•⁠ ⁠The median of 30.69 is slightly higher than the mean, indicating a slight negative skew in the distribution.

•⁠ ⁠The range of 25.58 to 35.80 indicates a moderate spread in income levels within the population.

•⁠ The standard deviation of 3.05 suggests moderate variability in wage and salary incomes.

•⁠ The slightly negative skewness and kurtosis values indicate a distribution that is nearly symmetric and
slightly more peaked than a normal distribution

II. Graphs
• Life expectancy at birth ( years )

Life expectancy at birth, female (years) [SP.DYN.LE00.FE.IN]

60
59
58
57
56
55
54
53
52
51
00 02 04 06 08 10 12 14 16 18 20 22

• Wage and salaried workers, female

Wage and salaried workers, female (% of female employment) (mode

36

34

32

30

28

26

24
00 02 04 06 08 10 12 14 16 18 20 22
 • Fertility rate, total ( births per woman )

Fertility rate, total (births per woman) [SP.DYN.TFRT.IN]

7.8
7.6
7.4
7.2
7.0
6.8
6.6
6.4
6.2
6.0
00 02 04 06 08 10 12 14 16 18 20 22

III. Correlations

Variable Wage Fertility rate

Wage 1 -0. 45

Fertility Rate -0.45 1

the data suggests an inverse relationship between wage levels and fertility rates, which is a well-documented
phenomenon in the field of demographic economics. The strong negative correlation coefficient of -0.45
indicates a very strong, almost perfect, negative linear relationship between these two variables
IV. Regression results
Dependent Variable: LIFE_EXPECTANCY_AT_BIRTH__FEMALE__YEARS_
__SP_DYN_LE00_FE_IN_
Method: Least Squares
Date: 06/11/24 Time: 08:09
Sample: 2000 2023
Included observations: 24
Variable Coefficient Std. Error t-Statistic Prob.
FERTILITY_RATE__TOTAL__BIRTHS_P... -3.264632 1.215759 -2.685262 0.0139
WAGE_AND_SALARIED_WORKERS__F... 0.360553 0.178060 2.024895 0.0558
C 66.97418 13.87549 4.826798 0.0001
R-squared 0.893277 Mean dependent var 54.65029
Adjusted R-squared 0.883113 S.D. dependent var 2.661036
S.E. of regression 0.909777 Akaike info criterion 2.765233
Sum squared resid 17.38156 Schwarz criterion 2.912490
Log likelihood -30.18280 Hannan-Quinn criter. 2.804300
F-statistic 87.88525 Durbin-Watson stat 0.472807
Prob(F-statistic) 0.000000
LIFE EXPECTANCY=66.97+0.360553log(wage)-3.264632log (Fertility rate+e
Based on the provided regression model, the following interpretation can be made:
1.⁠ ⁠Constant Term (66.97418):
- This represents the predicted life expectancy at birth for females when both the Fertility Rate and
Wage and Salaried Workers variables are equal to 0.
- It suggests that the baseline life expectancy for females is approximately 67 years.
2.⁠ ⁠Fertility Rate (log (FERTILITY_RATE_TOTAL_BIRTHS_P...)):
- The coefficient of -3.264632 indicates that a 1% increase in the Fertility Rate is associated with a
decrease of approximately 3.26 years in the life expectancy at birth for females, holding the Wage and
Salaried Workers variable constant.
- This suggests that higher fertility rates are negatively correlated with female life expectancy, likely
due to the increased health risks and demands associated with higher fertility.
3.⁠ W⁠ age and Salaried Workers (log (WAGE AND SALARIED WORKERS F...)):
- The coefficient of 0.360553 implies that a 1% increase in the Wage and Salaried Workers variable is
increase of approximately 0.36 years in the life expectancy at birth
associated with an
for females, holding the Fertility Rate constant.
- This positive relationship suggests that higher participation in the formal labor market, represented by
the Wage and Salaried Workers variable, is associated with improved female life expectancy, possibly
due to factors such as better access to healthcare, higher income, and improved living standards.
4.⁠ ⁠Model Fit:
- The R-squared value of 0.893277 indicates that the model explains approximately 89.33% of the
variation in the life expectancy at birth for females.
- The Adjusted R-squared value of 0.883113 suggests that the model has a good fit, even after
accounting for the number of independent variables.
- The F-statistic of 87.88525 with a p-value of 0.000000 indicates that the overall model is statistically
significant, meaning that the independent variables collectively have a significant effect on the dependent
variable (life expectancy at birth for females).
V. normality test
5
Series: Residuals
Sample 2000 2023
4 Observations 24

3 Mean -1.78e-15
Median 0.136901
Maximum 1.159805
2 Minimum -1.576137
Std. Dev. 0.869322
Skewness -0.352960
1 Kurtosis 1.943790

0 Jarque-Bera 1.613902
-1.5 -1.0 -0.5 0.0 0.5 1.0 Probability 0.446216
Based on the provided information and the graph, The graph shows a histogram of the residuals from the
2000-2023 dataset. The histogram appears to have a bell-shaped curve, which is characteristic of a normal
distribution. The histogram and the normality statistics suggest the residuals follow a reasonably normal
distribution. This is a desirable property for many statistical modeling techniques that assume normality
of the residuals.
4. Conclusion
Numerous studies have shown a strong correlation between higher wages/income and longer life
expectancy. Higher incomes allow people to afford better nutrition, housing, healthcare, and other resources
that directly improve health outcomes. Conversely, low wages and poverty are associated with reduced
access to these key determinants of health, leading to lower life expectancy.
The relationship between fertility rates and life expectancy is more complex. In developing countries, high
fertility rates (large family sizes) are often linked to lower life expectancies, as resources must be spread
across more dependents. However, in developed nations, moderate fertility rates do not necessarily reduce
life expectancy, as robust social safety nets and economic development can support larger families without
compromising individual health.