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Equation 1 g0.29 0.9rgdp60,2.43 tradeshare; (0.60) (0.09) (0.78) R 0.14;R0.11;n - 65 Equation 2 g0.49 0.47rgdp60, +1.56 tradeshare, + 0.57 yearsschool, 2.16rev & coups, 0.35 assa sin ations; (0.14) (0.47) (0.69) (0.15) (0.76) R 0.36,R-0.30;n -65 Equations 1-2 above report two regression estimates obtained from a sample of 65 countries The numbers in parentheses are standard errors. The variables are defined as follows: Average annual growth rate in percent; yearsschool Years of schooling; rgdp Real GDP in 1960 (000Ş); coups; rev&coups Number of revolution and tradeshare Share of trade in GDP; assassinations Number of assassinations

1) Equation 2 has a higher R-squared. This in itself tells us that the model in Equation 2 is better than the model in Equation 1.

A) Why is this not a valid conclusion?

B) Which statistics can you use for a valid comparison of the ‘fit’ of the two models? What is your conclusion?

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