Understanding the Factors Affecting
The Unemployment Rate Through
Regression Analysis
An Individual Report
Presented to
The Faculty of Economics Department

In Partial Fulfillment
To The Requirements for
ECONMET C31

Submitted to:
Dr. Cesar Rufino

Submitted by:
Aaron John Dee
10933557

April 8, 2011
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TABLE OF CONTENTS

I. INTRODUCTION

4

A. Background of the Study

4

B. Statement of the Problem

5

C. Objective

5

II. THEORETICAL FRAMEWORK AND RELATED LITERATURE

6

A. GDP

6

B. Average Years in School

6

C. Population

7

D. Literacy Rate

7

III. OPERATIONAL FRAMEWORK

9

A. Model Specification

9

B. List and Description of Variables

9

C. A-priori Expectations

10

IV. METHODOLOGY

12

V. EMPIRICAL RESULTS AND INTERPRETATIONS

13

A. Regression of the Original Model

13

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B. Summary Statistics

15

C. Testing for Misspecification in the Model

16

D. Testing for Multicollinearity

17

E. Testing for Heteroscedasticity

18

VI. CONCLUSION

21

VII. BIBLIOGRAPHY

22

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I. INTRODUCTION
A. Background of the Study
When we were still kids, we dream of what we want to be in the future. Older people will usually ask us if what we want to be in the future. Most of us will say, they want to be a doctor, lawyer or engineer to name some. We think and think about our career, but once we are already in the college level, we now dream to become successful in life and have a stable job.
But with the rate of unemployment here in country continue to increase, there are no guarantee that once we graduated we will have a job immediately. Unfortunately, many still fail to have stable jobs. Some even can’t find a job even though they graduated from top schools. Then we found ourselves ending in the pool of unemployment.
Unemployment is indeed a