Program & Batch:

Term:
Course Name:
Name of the faculty:

Original or Revised Write-up:

PGDM 2016-2018
I
Business Statistics
Mrs. Mahima Gupta
Statistical Analysis of Ageing
Countries
Original

Group Number:

Eleven (11)

Topic / Title:

Group Members:

1.
2.
3.
4.
5.
6.

Kaushal Bhalotia- 16FN-60

Akansha Nigam- 16MKT-013
Varun Sharma- 16FT-171
Ayush Mishra- 16FT-027
Viplav Nigam- 16FT-140
Kumar Gourav- 16MKT-078

Executive Summary
The objective of the study conducted in this report is to document the statistical analysis tools
in highlighting a reasonable association among some of the macroeconomic variables. This
project expects to put forward an issue faced by different countries in the current era and back
it up with statistical analysis and reasoning.
The subject matter that is being investigated is the affiliation between life expectancy at birth
in years of a sample of countries with sample size 25 and the per capita income of the

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respective countries along with the deficiency in the nutrition in the average diet consumed
by their citizens. The above variables such as per capita income and nutrition deficit have
been taken as independent variables because it is believed that higher is the income of the
households of an economy the higher will be the spending levels on necessities such as
nutritious diet, healthcare and related facilities. This is expected to create a multiplier effect
which will impact the health of the economy and its citizens thereby raising the standard of
living. Nutrition deficit is another independent factor which logically affects the life
expectancy. We see that lack of nutrition in diet leads to stunted growth, malnutrition and
undernourishment which reduces the life span of a typical person. This culminates into
lowering of the average life span of the whole nation. When a healthy diet is not provided to
pregnant women the infants are born immature or with deformities. This depresses the
average number of years which they can be expected to survive if poor diet is continued to be
provided.
It has been witnessed that certain developed economies have high life expectancy rates. Their
population is ageing and their GDP or income growth is coming to a halt after a certain stage.
This report will statistically show that these developed countries with high expectancy rate
reach a stagnant or declining GDP or income rate whereas the developing countries which
have a major population being composed of youth and population aged between 25-45 are
booming and capitalising their scope for improvement in GDP or income.

INTRODUCTION
With the advancement of technology and the progress of the current civilisations the world is
moving towards a better era, continually. Almost all nations are heavily investing in their
growth and development and are trying to break through all the shackles of poverty,
unemployment, low growth and poor income levels. The nations are trying to improve their
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healthcare, IT and ITES, infrastructure, financial sectors amongst others by allocating huge
funds and by employing intensive capital and skilled labour. Somewhere these evolutions
have accompanied certain socio-economic evils such as ageing of the population. It is very
common to find the media writing and talking about the growing median age of the
population in certain countries. The thing which is strikingly prominent is that nearly all
developed countries are facing this problem whereas the developing countries are benefitting
from this event.
We, in this report have tried to statistically establish the result that there is a strong linkage
between the income of a nation, the nutrition deficit and the life expectancy at birth in years
of a nation. Economists believe that theres a relationship between a. life expectancy and
income and b. life expectancy and nutritional deficit countrywide. Here, the income is
measured by Gross National Income (GNI) per capita in current US$ and the nutritional
deficit which according to The Food and Agriculture Organisation of the United Nations is
measured by the average dietary energy deficit of undernourished people expressed in
kilocalories per person per day. So, this report tries to analyse the degree of relationship
between the above said parameters using statistical tools such as hypothesis testing and
regression analysis and understand how and what countries can do to grow and develop and
simultaneously avoid ageing of their population.

Research Problem
It is often discussed that some countries like South Africa, South Sudan and some other
countries especially African countries have very low life expectancy at birth due to social,
economic, political and terrorism problems, so they should be provided with some benefits so
as to elevate their conditions. However, on the other hand we see that developed nations such
as Japan, UK, USA are very high on their life expectancy which has resulted in a different
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problem i.e. ageing of their population. So does having a high life expectancy rate or aged
section in population necessarily pose that the country will have stagnant or falling growth
rates? Hence, we have taken this issue as a research topic for our project and have tried to
show what are the dependency levels and patterns that we can derive from statistically
analysing the data for some countries.
If we try to design a journey map, then we may find that initially a country has low growth
and development and faces plethora of socio-economic problems, low life expectancy being
one. Then with great efforts it progresses to become an emerging economy, the stage where it
is flourishing and has relatively better scenario than the initial stage and finally, it reaches a
saturation point where it becomes a developed and a rich nation. However, at this final stage
its population starts to age; the median age of the people increases, health conditions become
better so death rate reduces. This depresses the rate at which the population is rejuvenated.
In the next section we will examine the data and apply some statistical concepts to search for
any particular pattern or relation. Henceforth we will posit some recommendations for the
countries experiencing either extremes of the research problem and also for the countries
which are proceeding towards being a potential aged country.

Research Analysis
A brief outline of the analysis
At the onset we will try and run a multiple regression by Ordinary Least Square Method, in
MS-Excel on the cross-sectional dataset which has life expectancy at birth in years, the per
capita GNI (income) and the food or nutrition deficit measured in kilocalories per person per
day for twenty-five countries chosen from different continents for the year 2014. We will then
be using hypothesis testing and significance test to determine if the net regression coefficients
obtained are significant at 95% significance level. A study of R2 and adjusted R2 will reveal
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the strength of the relationship between the various parameters. Finally, we will infer about
the population from this sample analysis and determine the confidence interval estimate for
the net regression coefficients.
Ordinary Least Square Method (OLS Method)
This is a method of estimation in which the unknown parameters are determined in a
regression model by minimising the sum of the squares of residual values of the data points.
This is the most widely used method of linear estimation through regression. Here, we are
examining dependency of Life Expectancy (LE) on GNI per capita and Nutrition Deficit.
Hence our dependent variable is Life Expectancy (Y) whereas the GNI and Nutrition Deficit
are the independent variables denoted by X1 and X2 respectively. In MS-Excel when we run
regression on the data set presented in the next page, we derive the following estimated linear
equation.
Y' = 76.13426 + 0.000237 X1' - 0.03083 X2'
Where Y', X1', X2' represent the estimated variables of Life Expectancy, GNI per capita and
Nutrition deficit respectively. We consider = 76.13426, 1=0.000237 and 2= - 0.03083.
These are the net regression coefficients derived from estimating using OLS Method.
Country

Argentina
Australia
Bangladesh
Brazil
Canada
Egypt
France
Germany
India
Indonesia
Italy
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LE
(years
)
76
82
72
74
82
71
82
81
68
69
83

GNI per capita Nutrition deficit

(current US$)
(kcal)
11,868.40
52,761.10
985.20
11,468.40
49,316.30
2,588.70
41,900.60
45,699.40
1,679.20
3,581.70
33,445.30

140.00
130.00
300.00
250.00
130.00
190.00
130.00
130.00
290.00
200.00
140.00

Japan
Korea
Libya
Mauritius
Mexico
Myanmar
Nepal
Pakistan
Philippines
Portugal
Saudi Arabia
Sudan
United Kingdom
Yemen

84
82
72
74
77
66
70
66
68
81
74
64
81
64

46,088.80
24,550.00
6,287.40
9,720.00
9,317.10
1,280.00
682.30
1,177.10
3,066.40
21,180.60
21,499.90
1,644.40
39,592.10
1,140.00

130.00
130.00
130.00
180.00
210.00
200.00
260.00
270.00
270.00
110.00
150.00
220.00
130.00
290.00

Sources: Life expectancy- World Bank database at www.databank.worldbank.org

GNI per capita - World Bank database at www.databank.worldbank.org
Nutrition Deficit- The Food and Agriculture Organisation at www.fao.org

Now that we have estimated the regression equation we will conduct test of significance and
hypothesis testing to determine if the values of 1 and 2 are significant.
Test for the slopes
H0: 1= 0 {signifies that LE is independent of GNI and linear relationship does not exist}
H1: 1 0 {signifies that LE is dependent on GNI and linear relationship exists}

Using the t- test and tstat from the above table we determine if the value of 1 is significant at
0.05 level of significance. We see that t stat = 4.740275 and degrees of freedom (n) = 22.
Because tstat = 4.740275 > 2.0739 (t- critical value from the t-distribution tables) and p-value
is approximately zero and less than 0.05, we strongly reject the null hypothesis H 0 and
conclude that at 0.05 significance level there exists a positive linear relationship between LE
and GNI.
Similarly, for 2 we can derive that
H0: 2= 0 {signifies that LE is independent of nutrition deficit and linear relationship does not
exist}
H1: 2 0 {signifies that LE is dependent on nutrition deficit and linear relationship exists}
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Here, degrees of freedom (n)= 22 and t stat = -2.13348 < -2.0739. Also the p-value is less than
0.05 hence we conclude that at 0.05 significance level there exists a significant negative
linear relationship between LE and Nutrition Deficit. Now we will perform the test of
significance using the overall F test which uses F-statistic. Here,
H0: 1= 2= 0 {signifies no linear relationship between independent and dependent variables}
H1: at least one j 0, j= 1,2 {signifies linear relationship between dependent variable and at
least one independent variable}

From the F-tables we can find critical value at 2 and 22 degrees of freedom and at 0.05
significance level to be 3.44335. Because F stat = 47.22772266 > 3.44335 and the p-value =
1.083E-08 <0.05 we reject H0 and conclude that at least one of the independent variables is
related to the LE.
So from the above testing we safely and strongly infer a positive relationship between LE and
GNI per capita and a negative relationship between LE and Nutrition Deficit. The following
two graphs depict the relationship and show the lines of best fit for the respective cases.

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f(x) = + 1
R = 0

80
LE

GNI per capita Line Fit Plot

f(x) = 0x + 68.92
R = 0.77

70
60
0.00

10,000.00

20,000.00

30,000.00

40,000.00

50,000.00

GNI per capita

LE

Linear (LE)

Predicted LE

Linear (Predicted LE)

Nutrition deficit Line Fit Plot

90
85
80
LE

75
70

f(x) = - 0.08x + 89.94

R = 0.62

65
60
90.00

140.00

190.00

240.00

290.00

Nutrition deficit
LE

Linear (LE)

Coefficient of Multiple Determination

After analysing the significance of the net regression coefficients it is required to decipher the
degree of association between the dependent variables and independent variables. This degree
is measured by coefficient of multiple determination R 2 and the adjusted R2. From the
following table the values can be interpreted that there is strong relationship between LE and GNI per
capita and Nutrition Deficit because the R2 which denotes the proportion of variation in LE

that is explained by the set of the independent variables (Levine, Stephan & Szabat, K. A.
2016). Here R2 = 0.811249 which means that 81.12% of the variation in the dependent
variable is explained by the independent variables.
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This statistic illustrates the closeness of the data points to the line of best fit obtained by
regressing the data using OLS method. It is the ratio of explained variation to the total
variation and the value lies between 0 to 1. The thumb rule for interpretation is that higher the
value of R2 stronger is the relationship and better is the goodness fit (Jim frost, 2013). The
adjusted R2 statistic considers the effect of the independent variables and the sample size in
calculating the strength of the relationship. A value of 0.794089 means that 79.40% of the
variation in the LE is explained by the regression model taking into consideration the effect
of the independent variables along with the sample size. The adjusted R 2 is always less than
the R2 value, when conducting multiple regression because the R2 statistic does not account
for the number of independent variables and the sample size. There is basically little or no
consideration for increasing parameter count, so the data points approach the best fit line. In
this case however, we have only two independent variables so there is no considerable
difference between the adjusted R2 and the R2 statistics.
Confidence Interval Estimation for the slopes 1 and 2.
The confidence intervals for the population slopes will provide us with the range within
which there is a change expected to happen in the LE when either GNI per capita or Nutrition
deficit is changed by a unit quantity ceteris paribus.
The confidence interval is given by [1 + t /2 (S.E)] where, S.E. is the standard error.
Therefore, the confidence interval for 1 is

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[0.000237 + (0.0000499 * 2.0739)] =>

0.00013 1 0.00034

Similarly, for 2 we get [ -0.03083+ (0.014452087 * 2.0739)] => -0.000857 1 -0.060802

The above interval for 1 shows that taking into consideration the nutrition deficit, a onedollar rise in GNI per capita is expected to increase the life expectancy by a quantity in the
range [0.00013, 0.00034] and a unit kcal increase nutrition deficit will reduce the life
expectancy in years by a quantity in range [-0.000857, -0.060802]. Since both the intervals
exclude zero we can conclude that both the slope coefficients are significant and the null
hypothesis as mentioned earlier can be rejected at = 0.05.
Multicollinearity
In a multiple regression multicollinearity occurs when there exists a relationship between the
independent variables such that a change in one variable affects the at least one of the other
variables. This phenomenon results in a poor capturing of the true relationship between the
dependent and independent variables. It depicts a stronger relationship through an increase in
R2 value. The value of VIF- Variance Inflation Factor reflects the presence of
multicollinearity in the regression. In our case we found the VIF to be 2.247 which is
relatively lower than 10. Hence, we can safely conclude that there exists negligible
multicollinearity among the independent variables.
Economic Interpretation
From the above statistical analysis, it is clear that the relationship between life expectancy
and GNI per capita is positive hence if the income of the citizens of a nation increase there is
an expectation of an increase in the life expectancy. This is probably the reason that countries
such as UK, Japan, and Italy which are developed have a high life expectancy rates. Their
growth in the income levels have resulted in better healthcare facilities, better technological
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equipment and etc. which has increased the health levels of the people and diminished the
expected mortality rates at birth. Hence, the problem of ageing population has risen in such
countries.
For nutrition deficit we find a negative relationship with life expectancy. This affiliation is
obvious because the lesser the nutritive value of diet of the people, especially the pregnant
women, the greater is the possibility of new born children to be born with poorly developed
bodies resulting in malnutrition and consequently depressing the life expectancy at birth.

Recommendations
The problem of an ageing population poses serious threats to an economy in all possible
aspects such as economic, social and political. Hence, developing economies should pay heed
to this possible problem which they may face at a later stage whereas the developed nations
should now implement policies and try to capitalise their aged population which form the
majority of their population and are dependent on the working section of the economy. The
following are our general recommendations so that the economies may check their ageing
population.
a) The age of retirement should be increased- in India since 2014 the retirement age has
been set to 58 years. In UK the retirement age for men is 65 years whereas for women
is 62 years. If this policy is changed and the ages increased, then the stagnancy in the
income levels can be curbed. The elderly population will be allowed to work for some
more years which will increase the GDP and hence the income levels of country. This
will also defer the dependency of elderly population on the younger working section.
b) Engage retired population in alternative work activities - the elderly population can
be involved in social services, groups or organisations. They can provide education,
vocational training or can participate in social work which uplifts the society and

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indirectly through multiplier effect raise the growth and development levels in the
c)

economy.
Increase the nutritive value of food and average diet - the underdeveloped and poor
countries should focus on better farming techniques and higher quality of agricultural
produce. They should also check any leakages in the distribution system of food. The
food products should be provided at subsided rates to the poor section of the society
so that they meet basic nutrition requirements. From the derived negative relation
between life expectancy and nutrition deficit we can infer if the nutritive value is high
the life expectancy will be high and hence income levels of the economy.

On a national level it is very difficult and costly to implement these policies. Firstly, the
government has to defer the retirement age which affects the employee and working class
turnover adversely because in developing countries especially, the rate of addition to
population is greater than the creation of jobs and employment. Secondly, engaging the
elderly section of the society requires creation of institutions and platforms where they can
get associated and work to benefit the society. It also requires launch of many schemes and
welfare programs which may prove to be expensive and burden the exchequer heavily.
Thirdly, catering to the proper diet of the citizens require to have minimum leakages and
frauds in the hierarchy of food supply chain right from their production stage to the
consumption. This involves huge administrative costs and requires high level intervention to
make sure the structure is transparent.

Conclusion
From the whole analysis conducted in the report we see that other things remaining constant,
life expectancy at birth can be expressed as a function of GNI per capita and Nutrition deficit

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where it is positively related to the former and negatively to the latter. World economies,
depending upon the stage of their development can understand their possible future
conditions and act accordingly to make their future better and desirable. On one hand the
developed countries can come up with innovative ways to address ageing issues on the other
hand the underdeveloped countries can realise their potentials and act accordingly to raise
their standard of living and increase their growth rates. Finally, we can conclude that as the
population tends to have more number of aged people the GDP or growth rate in the country
becomes stagnant or decreasing.

References
1. Levine, D. M., Stephan, D. F., & Szabat, K. A. (2016). Statistics for Managers Using
Microsoft Excel (7th ed., Vol. 1). Delhi, Delhi: Pearson.
2. The World Bank. (2015). GNI per capita, Atlas Method (current US$). Retrieved 6
August, 2016, from data.worldbank.org/indicator/NY.GNP.PCAP.CD
3. The world bank. (2015). Life Expectancy at birth, total (years). Retrieved 6 August,
2016, from http://data.worldbank.org/indicator/SP.DYN.LE00.IN
4. Jim frost. (2013, 30th May). Regression analysis: How do I interpret R-squared and
Assess

the

Goodness-of-fit? [Weblog].

Retrieved 6

August

2016, from

http://blog.minitab.com/blog/adventures-in-statistics/regression-analysis-how-do-iinterpret-r-squared-and-assess-the-goodness-of-fit
5. The FAO. (2015). The state of food insecurity in the world 2000. Retrieved 6 August,

2016, from www.fao.org/docrep/x8200e/x8200e03.htm

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