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PART 1, (Questions 1-7) Pollution and Economic Development. Grossman and Krueger (1995) were interested in finding the relationship between a country's per capita income and its mean annual pollution levels in air and water sources. Suppose you are a researcher trying to replicate their findings and you collect data from different pollution monitoring sites in cities across multiple countries to estimate the following equation: Y=B+BiGDP+B₂GDP + B,COAST + B, DESERT + CENTER+ BRESID+BIND+POPDEN + u where Y represents the mean pollution concentration (measured in micrograms per liter). GDP is the per capita GDP of the country where each site is located. COAST. DESERT, and CENTER are dummy variables that indicate the location of each site: COAST takes the value of 1 if the site is in a coastal city (0 otherwise). DESERT is 1 if the site is in a desert (0 otherwise). CENTER takes the value of 1 in sites in the center of a city (0 otherwise). RESID and IND are dummy variables that indicate whether a site is located in a residential area or an industrial area: RESID takes the value 1 if the site is in a residential area (0 otherwise), and IND takes the value 1 if the site is in an industrial area (0 otherwise). POPDEN is the population density (measured in persons pe square mile) of the city where the site is located. Question 1.

O Time-series O Cross-section Panel Question 2 In Grossman and Krueger's original paper, they found that as GDP per capita rises, so does pollution until it reaches a turm point after which pollution begins to decrease with GDP per capita. This means we would expect 3₁ to be and 3₂ to be [Select] ✓ [Select] Positive Negative

Question 2 4 pts In Grossman and Krueger's original paper, they found that as GDP per capita rises, so does pollution until it reaches a turning point after which pollution begins to decrease with GDP per capita. This means we would expect 3₁ to be [Select] and 3 to be ✔ [ Select] Positive Negative MacBook Pro