Exploring correlations between economic indicators with natural and societal factors based on linear regression model

Abstract

Existing research on the determinants of a nations economic development has predominantly centered on individual factors, including energy, land resources, education, taxes, employment, and healthcare. Regrettably, there is a paucity of studies that holistically examine these factors collectively and assess their respective contributions to economic development. Therefore, the primary objective of this study is to investigate the interrelationships between economic indicators and various natural and societal factors. The article firstly uses the Pearsons correlation coefficient to filter out a portion of the higher degree of correlation from factors that may have an impact on the countrys economic development for further analysis. For the selected factors, using two linear regression models: Ordinary Least Square (OLS) method for preliminary modeling for the extent of affects between each factors and economy; and Fully Modified Ordinary Least Squares (FMOLS) method, as an optimization model, further eliminating the less influential variables. After obtaining the final impact model of the linear correlation, the data is screened based on the variables within the model. A portion of the selected data is used as a training set for training the model and the remaining data is used as a test set for testing the performance. The results of the study show that factors including land area, army size, CO2 emissions, population, minimum wage, would have varying degrees of integrated impact on the economic development of the country.