Research Exercise 1: Instructions

Research Exercise 1: Instructions Instructions: 1. Cross-national scatter plots of trade openness and economic performance. a. Create a scatter plot with some measure of trade openness on the x-axis and some measure of economic performance on the y-axis for the year 2000. We recommend that you use the Quality of Government data set (http://www.qog.pol.gu.se/data/) but you may also use another data set if you like. If you use the QoG data set, look through the codebook to choose your measures. The data and codebook will be posted on the class website under Week 2. b. Explain (briefly) which variables you used, why you chose them, and assess the strengths and weaknesses of the variables. c. Analyze the scatter plot. What does it tell you about the relationship between trade openness and economic growth? What are some limitations of the graph? (e.g., why might the apparent relationship not really be what it appears to be?) d. Create a second scatter plot that is different in some way from the first. For example, use a different year, or a different measure for the x or y axis (but it should still be trade and economic performance), or a subset of countries (for example, only poor countries, or only rich countries, or only small or large population countries, or only Asian or European or African countries, or a different year, or a different measure of trade openness and/or economic performance, or whatever) e. Analyze the second scatter plot, including comparing/contrasting it with the first. 2. Create a time series plot of trade policy and economic performance. a. Look at Table A2 in Wacziarg & Welch (posted on class website under Week 1) to identify a country that changed its policy, and what year it changed its policy: Then make a timeline for that country of economic performance (it can be GDP growth or GDP per capita growth or GDP or GDP per capita, for example). b. Analyze the time-series plot. Look at the year when the country changed its trade policy, and see if you think that the change in trade policy led to a change in economic performance. Explain what kind of change the readings would predict, and whether that change actually happened for that country. Below are step-by-step instructions to complete this assignment, if you are not familiar with a statistical program. The first uses Excel. Download the.csv data file for to use Excel. The second uses Stata. Download the.dta data file to use Stata. The third uses www.gapminder.org. My preference is that you use Excel or Stata, but do what you can. EXCEL Note: These instructions were prepared for use with Excel 2010. However, you should be able to create graphs using roughly the same instructions in Excel 2007. 1

Step 1: Opening and Formatting the Data (NOTE: If you want to skip Step 1, I posted selected variables from the QoG data set and the codebook on the class website) Download the Quality of Governance (QOG) Time-Series Dataset as a CSV file via the following link: http://qog.pol.gu.se/data/datadownloads/qogstandarddata Open Microsoft Excel. From the Data menu, under Get External Data, select From Text. Select the CSV file you downloaded. This will open a Text Import Wizard. In the Wizard, check the box that says Delimited and click Next. On the following screen, select Semicolon under the list of Delimiters and click Next. On the following screen, select General as the Column Data Format and click Finish. Before proceeding to analyze the data, save this file to preserve the data format. At this point, download and open the QOG Codebook (available at the link above). The Codebook contains a list of variables contained within the dataset, as well as a description of each variable. For this exercise, you should now familiarize yourself with the different measures of economic growth and trade openness contained in the dataset, and think about which variables you would like to use throughout the exercise. Step 2: Sorting the Data In Excel, the first row of the QOG dataset contains the variable names. These names correspond to the names of the variables that appear in the QOG Codebook. The values for each variable appear vertically in the columns. Since the first part of the exercise asks you to create a scatterplot for the year 2000, you will want to sort the data by year and then by country. To do this, select all of the data (using Ctrl+A). Then click on the Data tab and choose Sort. Under Column, select Sort by: Year. Then click Add Level and select Then by: cname. This will sort the data by year, and then alphabetically by country. At this point, it may be helpful to freeze the data-panes for easier viewing. The Excel help file contains information on how to do this. The easiest way is to highlight the ccodealp column and then highlight the columns to the left of this one. Then select View, Freeze Panes, and choose the first option on the dropdown menu that appears. After sorting the data, scroll down to the data for the year 2000. At this point, copy the data from the cname and year columns into a separate spreadsheet. Next, return to the very top of the dataset (the first row) and scroll horizontally through the data to find the variable name that corresponds to the measure of trade openness you selected from the codebook. Once you ve identified the variable you would like to use, scroll back down to the year 2000 and copy the trade openness data for that year into a blank column of the new 2

spreadsheet you created. That spreadsheet should now contain a list of country names in the first column, followed by a year column (in this case, the year is 2000), and finally, a trade openness column. The trade openness data will comprise the x-axis values of the scatterplot you create. Now, repeat this process for the measure of economic growth that you ve selected, and add the 2000 data on economic growth to the new spreadsheet you have created. The economic growth data will comprise the y-axis values of the scatterplot you create. Now you are ready to graph the data for the first part of the exercise. Note that data for some countries may be missing; that is okay. You can leave these blank values in the new spreadsheet you created without causing any errors. Step 3: Graphing the Data (Creating the First Scatterplot) To create a scatterplot of the data in your new spreadsheet, highlight the columns which contain the data on trade openness and economic growth. Make sure that the trade data appears in a column to the left of the growth data. Then on the Insert tab, select Scatter (under Charts ), and Scatter with only Markers. This will create a scatterplot with the trade data on the x-axis and the growth data on the y-axis. You can then use the features under the Chart Tools tab to add labels to the x-axis and y-axis (be sure to indicate the units), as well as a title for the graph as a whole. After labeling the graph, add a Trendline. To do this, click on a single datapoint. Then, right-click and select Add Trendline. Choose a Linear Trendline and change the line color and size as you see fit to improve visibility. Now, we will insert each country s name onto the scatterplot. To make each country s name appear on the graph above their corresponding datapoints, go to http://www.appspro.com/utilities/chartlabeler.htm and download the XY Chart Labeler. This is an Excel add-on that must be installed in order to label the datapoints by country name. Close Excel and follow the installation instructions. Then, reopen Excel. You will now see a new tab titled XY Chart Labels. Under this tab, select Add Labels and highlight the names of the countries in the dataset. Then select OK. This will add country name labels to the graph (note that this may take a bit of time to load). You may wish to shrink the text of the names to make them more legible. This completes the process of creating the initial scatterplot. Your scatterplot should look somewhat like Scatterplot 1 that appears at the end of this document. Step 4: Graphing the Data (Creating the Second Scatterplot) To create the second scatterplot described in the exercise either for a different year or for a subset of countries or with a different variable repeat the process described above using the different data. While the data will be different, the steps for creating the second scatterplot will be identical to those outlined above. Your second scatterplot might look something like Scatterplot 2 that appears at the end of this document. Step 5: Graphing the Data (Creating a Country Line Graph) 3

For the third graph, you will be looking at data from a specific country whose trade policies changed from being open to closed according to an updated dataset compiled by Wacziarg and Welch. To identify these countries, first consult Table A-2 in the Wacziarg and Welch PDF posted under the Course Materials tab on Blackboard. For this part of the exercise, choose a country whose year of openness appears in the rightmost Wacziarg and Welch (2003) column. The purpose of this part of the exercise is to compare the economic performance for a given country before and after the year in which the country became open according to the Wacziarg and Welch data. You will therefore be preparing a graph with the year on the x-axis and economic performance on the y-axis. Begin by selecting the economic performance variable that you would like to use from the QOG Codebook. You will then want to sort the data in the formatted time series QOG excel file: first by cname, and then by year. You should now find the data corresponding to the economic performance variable and country that you have selected. Copy and paste the data into a separate spreadsheet. The new spreadsheet should include two columns: one for the year and one for the economic performance data. For whichever country you select, make sure that the QOG dataset contains economic performance data for at least several years before and after the country s transition to openness (as indicated by Table A-2); also, make sure that the first and law row of the economic performance column (in your new spreadsheet) contain data. Highlight the column that contains the economic performance data. Then click on the Insert tab and choose Line to insert a line graph. Right-click on the graph you have created and choose Select Data. Under Horizontal (Category) Axis Labels, click on Edit. In the box that appears, highlight all of the years of data in your Year column and click Ok twice. This will change the x-axis labels to display the years of data you have selected. Format your graph by adding labels and titles as you did for the scatterplots. Then, right-click on the x-axis labels and select Format Axis. Under Axis Options and Position Axis, select On tick marks. Click Close. Once you have finished formatting the graph, add a vertical line on the graph to indicate the year in which the country switched from being closed to open. To do this, under the Insert tab, select Shapes and then choose the line object. Draw the line on your graph and change the color and width as necessary to improve visibility. Finally, right-click on the line you have drawn and select Group to group the line with the rest of the graph as a single object. Your completed line graph should look somewhat like Figure 3 that appears at the end of this document. 4

Economic Growth 30 25 20 15 10 5 0-5 Sca5erplot 1: Trade Openness and Economic Growth (2000) Liberia Turkmenistan Grenada Belize Equatorial Guinea Azerbaijan Russia China Israel Kazakhstan Estonia Albania Bhutan Botswana Cambodia Ireland Swaziland Singapore Korea, South Mauri,us Rwanda Sudan Bangladesh Benin Armenia Cape Bosnia Herzegovina Bulgaria Belarus Bahrain Brazil Australia Cameroon Canada Verde Guinea- Bissau Congo Tajikistan Malaysia Luxembourg Ethiopia Turkey Cuba Egypt (1993- ) Mexico Dominican Nepal Samoa Latvia Uganda Chile Finland Republic Gambia Cyprus France Greece Austria Bahamas Hungary Honduras India Indonesia Iran Nigeria Laos Kyrgyzstan Malta Madagascar Algeria Angola Belgium Central Colombia Denmark Czech Bolivia Brunei Burkina African Ecuador Germany Guatemala Iceland Micronesia Kuwait Oman Pakistan (1972- ) Tanzania Sri Lanka Philippines South Spain Ukraine Vietnam Trinidad and Tobago Japan Italy Poland Saudi Libya Lithuania Faso Republic Croa,a Ghana Jordan Macedonia Republic Lesotho Maldives Mali Nicaragua Guinea El Salvador Georgia Costa An,gua Rica Barbados Comoros Hai, Malawi Lebanon Morocco Mauritania Montenegro Arabia Namibia Netherlands Peru Sierra Portugal Africa United New Zealand Senegal Leone Sweden Slovenia Arab Norway St Vincent Tunisia Seychelles Emirates Thailand United Zambia United States Uzbekistan Venezuela Kingdom Yemen Tonga Romania Syria Switzerland Moldova Vanuatu Panama St Ki[s and Nevis Mozambique Grenadines Kenya Kiriba, and Barbuda Djibou, Mongolia Jamaica Marshall Dominica Slovakia Palau Islands Burundi Argen,na Niger Chad Togo St Suriname Lucia Uruguay Gabon Fiji Guyana Papua New Guinea Cote d'ivoire Paraguay Congo, Democra,c Iraq 0 50 Republic 100 150 200 250 300 350 400 Zimbabwe - 10-15 Eritrea Solomon Islands - 20 Trade Openness 5

Economic Growth 40 30 Lebanon St Lucia United Arab Emirates 20 Iran Bhutan Belize Bangladesh Colombia Cyprus India Indonesia Thailand Vanuatu Korea, Turkey South Botswana Australia China Burundi Comoros Benin Bolivia Chile Costa Austria Rica Dominica Ecuador Egypt Ireland Japan El Salvador Germany Laos Nigeria Israel Saudi Arabia St Vincent Malaysia and Swaziland the Fiji Ethiopia Equatorial France (1993- ) Guinea Gambia Gabon Grenada Guatemala Ghana Guinea Belgium Bahrain Guinea- Bissau Kenya Malawi Marshall Mauri,us Islands Panama Singapore Mexico Uganda Tanzania Venezuela Zimbabwe Nepal Sri Lanka Syria Seychelles Tunisia Jamaica Lesotho Malta Pakistan Spain Morocco Portugal (1972- ) Luxembourg Italy Madagascar Netherlands Micronesia Angola Algeria Brunei An,gua and Barbuda Greece Mozambique Finland Canada Argen,na Burkina Cape Denmark Iceland Norway Verde Central African Republic Faso Congo Cote d'ivoire Namibia Grenadines 10 Sierra Switzerland Vietnam United Leone Philippines Paraguay United States Congo, Bahamas Honduras Jordan St Ki[s Kiriba, and Nevis Somalia New Nicaragua Zealand Democra,c Brazil Hungary Mongolia Mali Niger Oman Russia South Uruguay Suriname Kingdom Africa Sweden Uzbekistan Togo Trinidad and Tobago Zambia Senegal Slovakia Mauritania Chad Papua New Rwanda Guinea Tonga Cameroon Dominican Republic Republic Barbados Guyana Peru Estonia Romania Sudan Samoa 0 Albania Bulgaria 0 50 100 150 200 250 300 350 400-10 - 20-30 Sca5erplot 2: Trade Openness and Economic Growth (1990) - 40-50 Liberia - 60 Trade Openness 6

Figure 3: Economic Performance Before and AGer Openness fo Country XX Economic Performance 20 15 10 5 0-5 - 10-15 - 20-25 - 30-35 Year STATA The Stata file is likely to be too large for the default memory settings, so first increase the amount of memory: set mem 600m Then open the file. Click the File button on the menu bar, then click Open then find the file and click it, then click the Open button. On the results window it will show up as something like this: use "/Users/username/Downloads/QoG_data_v6Apr11/QoG_t_s_v6Apr11.dta" 7

The following command will create the scatter plot. Instead of opennessvar and growthvar, you should choose a variable of openness and of growth (or whatever). You can choose the variable by clicking on Window on the menu bar, and then click Variables. scatter growthvar opennessvar if year==2000, mlabel(cname) title("trade Openness and Growth") lfit growtvar opennessvar if year==2000 For the timeline, use the following command. In place of cname you should put in a country name. To see the country names, you can click on Data Editor on the menu bar, then click Start, then click Data Editor (Browse). Or you can click the icon of a spreadsheet with a magnifying glass. For yearopen, put the year that the country changed its trade openness policy, according to Wacziarg & Welch. tsline growthvar if cname=="cname" & growthvar~=., tline(1990) title("growth before and after trade policy change in cname") GAPMINDER Go to www.gapminder.org Click on Gapminder World For the scatter plot, I want to see how trade openness affects economic performance, so I m going to put the Trade variable on the x-axis (bottom of the graph), using the menu buttons (Economy to Debt & Trade to Trade merchandise % of GDP). Then I use the y-axis menu buttons (on the left side of the graph) to choose an economic performance measure, such as GDP/capita growth annual % (Economy to incomes and Growth to GDP/capita growth). Then on the timeline on the bottom of the page, I slide the bar to the year 2000. If the graph looks good, copy it (maybe with a Screen Shot ) and add it to my Word document. The graph I did has most of the dots smushed in the bottom left corner because of some outliers, so I click the arrow on the bottom right corner of the graph, then use the magnifying glass icon in the bottom right of the graph to zoom in on the bottom left corner. WITHOUT MAGNIFYING GLASS: 8

With Mafnifying glass: 9

I don t think there is a way to generate a trend line (if you know how, tell me) but you can eyeball and see that countries with high trade openness tend to have higher growth rates, on average, although some large countries such as China and India are growing rapidly in spite of not being so open. For the timeline, I pick a country that, according to Table A2 of Wacziarg & Welch, had a change in economic policy. I ll choose Ghana, as I did above. I check Ghana on the list of countries in the table to the right. I use the button on the x-axis to change from Merchandise trade to Time. Then I slide the bar on the timeline at the bottom of the page to 1961. I make sure the Trails box is checked. Then I click Play, The years go buy, and Ghana s data point goes up and down across the screen. When it s done, I copy and paste it into my word Doc: 10

I don t know how to use Gapminder to draw a line. I could add a line using Insert Shape if I want to. Then I do my analysis. 11

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