Unemployment as an Indicator of Macroeconomic Performance

Unemployment as an Indicator of Macroeconomic Performance The rate of unemployment is one of the most important indicators of macroeconomic performance. Unemployment arises due to the distortions in the supply of labor cause by the non-competitive wage differential. During the period from 1945 until at least 1968, unemployment rates in the major European economies were extremely low by todays standards. For instance in the United Kingdom, the average rate of unemployment for the entire period was about 1.8% of the labor force and in worst years it did not even exceed 2.5%. The main driving force was autonomous rather than policy related. These forces include waves of new products and processes, spread of trade and development around the world. However the cause of unemployment problem in Europe in comparison to the United States was their labor market institutions while the United States is far more superior due to the flexibility of their labor market. In this paper, determinants of unemployment in US are the concerns with economic growth as the main concern. Economic growth of a nation is the increase in a nations real output that occurs over time. In general, growth and unemployment are closely related as unemployment affects the growth rate through the scale of operation of an economy. Besides that, FDI inflow and inflation are taken into account altogether to identify the relationship towards the unemployment rate. 1.1 Background As unemployment is one of the most important economic indicators, the unemployment rate provides useful information such as how the labor market works as well as the percentage of human capital that is not used in the production process, which is especially crucial towards policy makers. Consequently, it is important to analyze the factors that impact the unemployment rate regardless short or long term perspective. The United States of America is a developed country which has one of the largest population and production in the world (Encyclopedia, 2010). As unemployment are explained by structural factors mainly by inflexible labor market. One may wonder the about the impact which economic growth, inflation and FDI have on the unemployment rate of the United States of America as the clutches of unemployment are hard to escape even for a develop country, especially for US which possesses by far the most flexible labor market. As a case study, the United States of America has been chosen as the research country. United States of America is reckoned to be particularly appropriate as United States of America labor market has proven by all accounts to be more dynamic in the sense of a higher level of job turnover, resulting in high vacancy levels at any point in time. Recently, unemployment rate in the United States of America has been found to be as high as 9.6% as of August 2010 compared to the 4. 1% ten years ago (Bureau of Labor Statistics, 2010). In the mean time the real GDP growth in 2000 was at 4.14% when the unemployment rate was 4.1% while the real GDP growth in 2003 was at 2.49% when the unemployment rate was 5.8% (Bureau of Labor Statistics, 2010). From here, it can be seen that unemployment rate moves in the opposite direction of economic growth, yet there were different versions of results concluded by different previous researchers. 1.2 Problem Statement Unemployment has been a famous macroeconomic variable that researchers tend to use to study on but even with so many researches carried out, some of the results obtained are not consistent with one and another. For instance, the debates among Monetarist and Keynesian views of unemployment as well as the new contributions of Lucass approach and new Keynesian Economics shows that there was no reason to account for growth in the unemployment model. However, a significant innovation occurred with Pissarides'(1990) formulation of an unemployment theory in equilibrium. In many previous attempts, he formalize a unique framework to study the labor market dynamic perspective, providing useful tools to analyze both long and short run unemployment. Pissarides also introduced a first link between long run unemployment and growth which matches the neoclassical framework of economic growth. ( Pissarides, 1990 Ch. II) In the case of US, its economy began its current economic recovery in December 2001. However, rather than experiencing employment growth, not only did the unemployment rate increase but the number of new jobs created in the economy actually declined significantly during the first year of the recovery (Seyfried). Thus this paper is conducted so as to affirm the relationship of economic growth has on the unemployment rate of the country. As some results obtained by past researchers showed that economic growth impacts unemployment whereas the others came to a conclusion that unemployment causes economic growth whereby the existence of Granger Causality relationship is quite possible. In this study, economic growth, inflation and FDI serves as explanatory variable to determine the relationship towards unemployment rate in the United States of America. 1.3 Objectives This study aims to investigate the determinants of unemployment rate in the United States of America with economic growth as the main concern in addition with inflation and FDI (foreign direct investment) to further assure that it is coherent with the results obtained from previous studies. 1.3.1 Specific objectives This paper aims to examine the relationship between economic growth, inflation and FDI towards the unemployment rate. On the other hand, this paper serves to probe further into the relationship between economic growth, FDI, and inflation towards unemployment to sustain the existence of granger causality relationship. 1.4 Significance of study The contribution of carrying out this study is to allow policy makers to have an insight of unemployment so as to allow them to decide on suitable policy that will help bring down the unemployment rate while sustaining appropriate inflation level and attract sufficient FDI inflow. The results generated will help provide insight to the nature of the relationship between economic growth, inflation, and FDI towards unemployment. It would be useful to policy makers to know the rate and relationship of economic growth as it is necessary to reduce the unemployment rate, or at least keeping it from rising. Moreover, in previous studies, FDI is found to have impacted the unemployment rate indirectly through spillover effects from economic growth. In this study, however, FDI is incorporated directly to affect unemployment growth; therefore the effectiveness of the implemented policy will be taken into account more effectively. CHAPTER 2: Literature Review 2.1 Conceptual Model According to Alexopolous (2003), in the case where there is technological growth in the economy, families will increase their investment in capital, which in turn increase the amount of family purchased consumption workers receive over time. As a result, firms optimally increase the wage rate proportionately in order to prevent workers from shirking on the job. Therefore, the rate of unemployment along the balanced growth path will not change over time, since the marginal product of labour and the marginal cost of labour grow at the same rate. Based on De Groot, in general, growth and unemployment are intimately related for two reasons. Unemployment affects the scale of operation of the economy and thereby the growth rate. Growth affects inter-temporal decisions of workers about where to allocate on the labor market once they are laid off, and thereby it affects equilibrium unemployment. According to Brecher (2007), rapid economic growth and FDI, accompanied by higher per capita income, usually increase output growth. Thus, domestic firms and foreign multinational corporations will demand more labour force with skills to create products. Hence, economic growth can promote future employment growth for labour force based on new Keynesian theory of the output-inflation tradeoff. Some studies found that overseas investment replaced domestic employment in developing countries; however, the same result did not happen in developed countries. Tremblay (2007) pointed out that based on classical economic theory, the Phillips Curve illustrated long-run tradeoff between unemployment and inflation. There is an inverse relationship between inflation and unemployment, that is saying inflation will rise when unemployment decrease and vice-versa. Futhermore, Luciano Fanti and Piero Manfredi (2003) mention that the neoclassical Solow model, which still provides excellent econometric fits and shows a globally stable positive growth equilibrium, but also shows two restrictive features as regards the scope of this paper: (1) it does not take into account the stylized fact of the existence of unemployment, which is generally not only positive but also strongly fluctuating; (2) in such a model fluctuations have never been endogenously determined Meanwhile, Martin Zagler (2006) noticed that the cost associated with economic growth is structural unemployment, as structural change destroys jobs in one firm and creates jobs in another. The source of unemployment is the rate of intra-sector structural change associated with faster economic growth. Besides, Bonatti (2007) says that an increase of the workers influence on the political process may raise the fraction of GDP allocated to finance the welfare state, thus leading to a higher unemployment rate and to a lower growth rate. The research work done by Chang (2007) noticed that when the degree of trade openness of Taiwan is larger, the unemployment rate of Taiwan will increase, this is because the young men and young women in Taiwan desire to extend their education in working age. According to Phillips (1998), the negative relationship between inflation and unemployment can be explained through governments expansionary policy to increase the consumption level of the citizens. As labor market tightens, unemployment rate will fall as money wages tended to rise more rapidly. Unemployment will then increase as government tries to control the inflation rate. This is because the increment in wages is closely related with the increase in price. Therefore, the trade-off between these two variables can be seen. 2.2 Methodology Effects panel regression methods were used by Zagler (2006) on the relationship between economic growth and unemployment. Moreover, Zagler (2006) checked his estimated model with the unit-root test to test the stationary of the model. In order to obtain information about the relationship between inflation and unemployment, the procedure of den Hann was employed by Bae (2006), which has the advantage as no assumptions about the order of integration in the variables of interest is required. The procedure estimates a vector regressions (VAR) model and analyzes the correlations of VAR forecast errors of inflation and unemployment at long horizons. Chang (2007) used vector autoregression method of variance decomposition and impulse response function analysis are applied to analyze various relationships among foreign direct investment (FDI), economic growth, unemployment and degree of openness in Taiwan. Besides that, he also uses the unit root test of augmented Dickey-Fuller (ADF and KPSS) test to examine the stationary properties of the economic time series. The appropriate lag-length in the ADF regression is selected by minimizing the Akaikes information criterion (AIC). He also uses co-integration test to determine whether there exists a long-run equilibrium relationship among variables and weak exogeneity, and multivariate Granger-causality test to determine their causal direction in the short-run between all variables. Besides, he also has applied the VAR technique of variance decomposition and impulse response function analysis to analyze various inter-relationships between FDI, unemployment rate and GDP variables in the case of Taiwan from the period of 1981 to 2003. Meanwhile, Eric Heyer, FrÃÆ' ©dÃÆ' ©ric ReynÃÆ' ¨s, Henri Sterdyniak (2006) present the results of the DF-GLS unit root test to test the growth rate of consumer price and also unemployment rate. 2.3 Empirical Result Zagler (2006) has carried out a research which empirically investigated the link between economic growth and unemployment, using micro econometric evidence for the United Kingdom. The results generated showed a significant and negative relationship between unemployment and economic growth. According to the result generated by Muscatelli and Tirelli (2001), it is proven that there is a negative relationship between economic growth and unemployment as Japan, Germany, Italy, France and Canada. This result is generally in favour of those theories which predict a negative linkage between unemployment on economioc growth Besides, Pehkonen (2000) stated that a fall in GDP has significant relationship with unemployment as a drop in the GDP in Finland leads to an increase in the unemployment since demand for labor have shrunk. Therefore, Pehkonen (2000) concluded that unemployment would increase as a result of a decrease in economic growth. Meanwhile, Mitra and Sato (2007) found that the major links between external scale economies and growth are perceived in terms of technical efficiency, and higher growth is taken to reduce the unemployment rate. Futhermore, Scahaik and Groot (1998) found that the unemployment and economic growth relationship in imperfect competition economy and different periods, where structural changes occur, has a negative correlation and effect of different degrees through testing the structural stability. Chang (2007) proved that economic growth as well as FDI have negative effects on unemployment as FDI are expected to generate economic growth by encouraging the expansion of trade and foreign investment. In addition, according to Solows growth theory, employment for labour force with skill can further promote economic growth and this can be verified by Taiwans economy model. Okuns law stating that reducing unemployment for labour force can promote further economic growth is then verified. Furthermore, unemployment is very sensitive to changes in GDP and vice versa, which does lend support that rising economic growth can obviously affect unemployment for labour force. shock of unemployment rate has negative effect on economic growth . He also mentions that the shocks in economic growth and FDI inflow decrease the unemployment rate. This means that rapid economic growth and FDI inflow, accompanied by higher per capita income can promote future employment growth for labour force. In the research study of Meckl (2001), correlation between growth and unemployment is shown to be positive if the research sector is of the high-wage sector in the economy, and negative if the research sector is the low-wage sector. Arico (2003) has already observed that the rate of growth is negatively related with the rate of unemployment. If the growth rate increases, it will decrease the net rate at which the stream of profits is discounted. For each firm the entry will result less costly. More vacancies will be created, reducing the unemployment rate. (Capitalization effect).On the other hands, It will reduce the life-time of each firm, by increasing the price for human capital. Each innovation will generate fewer vacancies than before. That will be reflected in an increase of the rate of unemployment. (Indirect creative destruction effect). Besides, Fanti and Manfredi (2003) has shown a negative relation between unemployment and growth , though we should also mention the positive relation between unemployment and growth obtained in the particular creative disruption context according to Schumpeters idea. Fanti and Manfredi alsomshows a surprising relation between unemployment and growth (via effects on population which is an endogenous engine of growth): this relation can be either positive or negative depending on the relative levels of cost of childrearing of workers and unemployed persons and the level of unemployment benefits. Meanwhile, Bonatti (2007) noticed that reduction of government transfers in favor of the workers allows decreasing the ratio of total tax revenues to GDP, thus monotonically increasing the growth rate and leading to a lower unemployment rate. CHAPTER 3: RESEARCH METHOD 3.1 Data Analysis 3.1.1 Unemployment Rate In this study, unemployment rate is the main study which was examine by using some explanatory variables. According to BLS, Bureau of Labor Statistics, (2009) those people who are with jobs can be considered as employed. On the other hand, a person will be classified as unemployed if they do not have a job, have actively looked for work in the prior 4 weeks, and are currently available for work. Dixon Shepherd (2002) stated that the unemployment rate can be considered as one of the most important indicators of macroeconomic performance in a country. The data of unemployment rate is obtained from the Bureau of Labor Statistics (BLS) which if measured in percentage from those people who are 16 years old and above from year 1970 to 2007. The method which BLS used to calculate the unemployment rate in United States is: X 100% 3.1.2 Real Gross Domestic Product Real gross domestic product (Real GDP) in a country can be measured by the total output value of goods and services which produced from the domestic labor in the country in a given year, expressed in base-year prices. In this study, it is expected that there is a negative relationship between the Real GDP and unemployment rate in United States. The source of the United States Real GDP data is from the World Bank World Development Indicators and International Financial Statistics of the IMF. On the other hand, the data obtained was converted to a 2005 base year. The formula to calculate the data of United States Real GDP is as below: 3.1.3 Foreign Direct Investment Foreign direct investment (FDI) is a kind of investment which is made to serve the business interest of the investor in a company which is in a different nation distinct from the investors country of origin. An example of FDI is a foreign company comes into a country to build or buy a factory and run a business there. Many economists believe that FDI is good for an economy, because it provides domestic job opportunities and increase domestic capital. In this study, net inflows of foreign direct investment in the measurement of current US Dollar are used. A net inflow of foreign direct investment is the total amount or value of the investment flow into United States from foreign investors to operate their business in United States and negative relationship between foreign direct investment and unemployment rate is expected in United States. 3.1.4 Consumer Price Index Consumer price index (CPI) is measured that examines the weighted average of prices of a basket of consumer goods and services in a country, such as transportation, food, rental fees and utilities fees. CPI is one of the measurements of inflation rate. According to Bureau of Labor Statistics (BLS), the prices for the goods and services used to calculate the CPI are collected in 87 urban areas in United States from about 23,000 retail and services establishments. The CPI data used in this study included all consumer items in United States from year 1970 to 2007. 3.2 Research Framework 3.2.1 Unemployment rate and Real Gross Domestic Product Based on the study, unemployment and real gross domestic product is expected to be negatively related. Edward (2007) stated there is a negative relationship between real gross domestic product and unemployment because of the theory of Okuns law. According to Okuns law, 1% increase in the unemployment rate will decrease GDP by 3%. However, Christopher (2010) said that, Okun coefficients can change over time because the relationship of unemployment to output growth depends on laws, technology, preferences, social customs, and demographics. 3.2.2 Unemployment and Consumer Price Index Consumer price index is one of the most frequently used statistics for identifying periods of inflation or deflation. This is because large rises in CPI during a short period of time typically denote periods of inflation. Therefore, we expect that there is an inverse relationship between the rate of unemployment and rate of inflation. According to the Phillips Curve theory, if the unemployment is high, inflation tends to be low. The diagram below shows the Phillips curve. Inflation Phillips curve Unemployment However, the result shows a positive relationship in our regression model. This problem will occur because of the multicolinearity problem in our regression model. But when one independent variable by one independent variable with the unemployment is tested, negative sign for consumer price index and unemployment are obtained. Bae (2006) stated that there is a positive long run relationship between unemployment and inflation. 3.2.3 Unemployment and Foreign Direct Investment In this study, inflow of foreign direct investment were expected to affect the unemployment rate significantly and expected that foreign direct investment has a negative long run relationship with unemployment. Foreign direct investment will increase job opportunities so, unemployment rate will decrease. Shu (2007) stated that FDI have negative effects on unemployment as FDI are expected to generate economic growth by encouraging the expansion of trade and foreign investment. 3.3 Econometric Methodology 3.3.1 Introduction This chapter consist the used of the method to examining the relationship between the unemployment and economic condition in United State by using the time series data ranging from the year 1970 to 2007. First, the result testing will start with the test of stationary by using Augmented Dickey-Fuller unit root test and proceed with the cointegration test. Secondly, the Multiple Regression Analysis and several ways to detect the assumption of the Classical Linear Regression Model (CLRM). The multicollinearity is used to test the correlation analysis. Breusch-Godfrey Serial Correlation LM Test is used to test the existence of serial autocorrelation, Autoregression Conditional Heteroscedasticity Test is used for testing the heteroscedasticity variance of error of the model and Ramsey RESET Test is used to detect the linearity regression and misspecification error. Unemployment = f (RGDP, FDI, CPI) RGDP = Real Gross Domestic Product FDI = Foreign Direct Investment CPI = Consumer Price Index The change in unemployment is our main study that we want to examine with using a few of variables which are RGDP (Real Gross Domestic Product), FDI (Foreign Direct Investment) and CPI (Consumer Price Index). y = ÃŽÂ ²0 + ÃŽÂ ²1Ln (RGDP) + ÃŽÂ ²2 (CPI) + ÃŽÂ ²3 (FDI) + Econometric Model with Expected Sign: = ÃŽÂ ²0 + ÃŽÂ ²1L (RGDP) + ÃŽÂ ²2 (CPI) + ÃŽÂ ²3(FDI) (-ve) (-ve) (-ve) Where +ve indicates that there is a postive relationship between the explanatory variable and dependent variable. On the other hand, -ve indicates that there is a negative relationship between the explanatory variable and dependent variable 3.3.2 Unit root A unit root test is used to examine whether a time series variable is stationary. In the model, T-statistic, F-statistic and R-squared are used to determine to ensure the validity of the test statistics is stationary. The result will become spurious regression problem if the non-stationary series in the ordinary least square (OLS) regression is used. Spurious regression result in high significant T-statistic and highly value for the coefficient of determination R-squared, and the R-square is larger than Durbin Watson. Therefore, if the stationary does not hold, estimate is not consistent and result will be misleading. To avoid the spurious regression problem, the Augmented Dickey-Fuller test (ADF) is used to examine the stationary of the variable. An Augmented Dickey-Fuller test (ADF) is used to test for a unit root in a time series sample. The Augmented Dickey-Fuller (ADF) statistic used in the test is a negative number. Therefore, the more negative value is, more power the rejection of the hypothesis that there is a unit root at some level of confidence. The equation for Augmented Dickey-Fuller (ADF) test Where ÃŽÂ ± is a constant, ÃŽÂ ² is the coefficient on a time trend and p is the lag order of the autoregressive process. ÃŽÂ ± = 0 and ÃŽÂ ² = 0 corresponds to modeling a random walk and ÃŽÂ ² = 0 corresponds to modeling a random walk drift. By including lags of the order p, the ADF formulation allows for higher-order autoregressive processes. This means that the lag length p needs to be determined when applying in the test. One possible approach is to test from high orders and examine the t-value on coefficients. The criterion such as the Akaike information criterion (AIC), Schwarz-Bayesian information criterion (SBIC) or the Hannan-Quinn information criterion (HQIC) test is used to examine the lag length. 3.3.3 Granger Causality The Granger Causality test indicates that a time series Y is said to be Granger caused by X if X helps the prediction of Y or equivalently if the coefficients on the lagged X are statistically significant. Granger Causality shows two-way causation in the case. X Granger causes Y and Y Granger causes X. It usually through a series of t-tests and F-tests on lagged values of X and lagged values of Y. 3.3.4 Multiple Regressions The ordinary least squares (OLS) or linear least squares are a method to examine the unknown parameters in a linear regression model. It is used to assume the distribance, ui. According to Gujarati (2003), ui stands for the normal distribution representing zero mean and constant variance, à Ã†â€™2 in the multiple regression models. With the normality assumption, OLS estimators 1, and 2 are linear functions of ui. Therefore, if ui are normally distributed, so 1,and 2 will make hypothesis testing more straightforward. OLS estimators of the partial regression coefficients are identical with the maximum likelihood (ML) estimators. There are the best linear unbiased estimators (BLUE). Besides, the least-square estimators are best unbiased estimators (BUE); it means that they have minimum variance in the entire class of unbiased estimators. 3.3.5 Multicollinearity Multicollinearity shows the two or more independent variables in a multiple regression model are highly linearly related. The multicollinearity test is perfect if the correlation between two independent variables is equal to 1 or -1. Multicollinearity will occur when there is a strong linear relationship among two or more independent variables. The equation below is refer the variables is perfectly multicollinear if there exist one or more exact linear relationships among some of the variables. Estimates for the parameters of the multiple regression equation is The ordinary least squares estimates include inverting the matrix XTX where, It indicate that if the linear relationship (perfect multicollinearity) is exactly with the independent variables, the rank of X is less than k+1 and the matrix XTX will not invertible. One of the detection of multicollinearity is used detection-tolerance or the variance inflation factor (VIF) for multicollinearity where R2j is the coefficient of determination of a regression of explanatory j on all the other explanators. Tolerances of less than 0.20 or 0.10 or a VIF of 5 or 10 and above reveal a multicollinearity problem. 3.3.6 Breusch-Godfrey Serial Correlation LM Test Breusch-Godfrey Serial Correlation LM test is a test of autocorrelation that is basically allows for nonstochastic regressors such as the lagged values of the regressand; higher-order autoregressive schemes such as AR (1), AR (2), etc and higher-order moving averages of white noise error terms such as t. Two variable regression models to illustrate the test, regressors can be added to the model and also lagged values of the regressand can be added to the model. Yt =ÃŽÂ ²1 +ÃŽÂ ²2Xt +ut The error term ut assume that the pth-order autoregressive, AR (p), Ut = ptut-1 + ptut-2 + à ¢Ã¢â€š ¬Ã‚ ¦+pput-p + t. where t.is a white noise error term. The null hypothesis H0 can be show as Ho: p1 = p2 = à ¢Ã¢â€š ¬Ã‚ ¦ = pp = 0 (no autocorrelation) At 5% significant level, if the computed p value of Chi-square is less than Chi-square tests, do not reject the null hypothesis, meaning that there is no autocorrelation problem. If computed p value of Chi-square is more than Chi-square tests, reject the null hypothesis, meaning that there is autocorrelation problem. 3.3.7 Autoregressive Conditional Heteroscedasticity Test In econometrics, Autoregressive Conditional Heteroskedasticity (ARCH) model assume that the variance of the current error term is related to the previos one. Autoregressive Conditional Heteroskedasticity model is used to model the time series with time-varying volatility such as stock price. 3.3.8 Specification error Ramsey Regression Equation Specification Error Test (Ramsey RESET test) is used to examine the specification error. The specification test for the linear regression model. More specifically, it is used to test the specification error in the equation. As the result, if the non-linear combinations of the independent variables have any power in explaining the dependent variable, means that the model is mis-specified. Consider the model Ã…Â · = E {y | à Ã¢â‚¬ ¡ } = ÃŽÂ ²Ãƒ Ã¢â‚¬ ¡ The Ramsey test is used to test whether the (ÃŽÂ ²1à Ã¢â‚¬ ¡)2, (ÃŽÂ ²2à Ã¢â‚¬ ¡)3à ¢Ã¢â€š ¬Ã‚ ¦,(ÃŽÂ ²k-1à Ã¢â‚¬ ¡)k has any power in explaining y. The Ramsey test is executed by calculate the following linear regression Ã…Â · = ÃŽÂ ²Ãƒ Ã¢â‚¬ ¡ + ÃŽÂ ²1Ã…Â ·2 +à ¢Ã¢â€š ¬Ã‚ ¦+ ÃŽÂ ²k-1Ã…Â ·k + ÃŽÂ µ After examine the test, the means of the F-test is to determine whether ÃŽÂ ²1 through ÃŽÂ ²k-1 are zero. If the null hypothesis reveals that all regression coefficients are zero, means that the null hypothesis cannot be reject, the Ramsey test is unable to detect any misspecification. If the null hypothesis is rejected, means that the model is misspecification. 3.3.9 Jarque-Bera Test of Normality Jarque-Bera test of normality is used to test the normally distributed. It is large-sample or an asymptotic test and based on the OLS. The test first calculates the skewness and kurtosis measures of the OLS residuals. JB = n Where the n = sample size, S = skewness coefficient, and K = kurtosis coefficient. The normally distributed variable, S is zero and K is three. Hence, the Jarque-Bera test of normality is a test of the joint hypothesis that S and K are zero and three, respectively. Therefore, the value of the Jaque-Bera statistic is expected to be zero. For the null hypothesis the residual is normally distributed, asymptotically (i.e., in large samples) the Jarque-Bera statistic gives the chi-square distribution with two degree of freedom showed by Jarque and Bera (Gujarati 2003) For the alternative hypothesis the residual is not normally distributed. At 5 significant levels, computed p value is less than Jarque-Bera statistic, we can reject the null hypothesis that the residual is not normally distributed whereas computed p value is more than Jarque-Bera statistic, we do not reject the null hypothesis that the residual is normally distributed. CHAPTER 4: RESEARCH RESULTS AND INTERPRETATION 4.1 Introduction This chapter consists of the results and interpretation of the relationship between Unemployment as an Indicator of Macroeconomic Performance Unemployment as an Indicator of Macroeconomic Performance The rate of unemployment is one of the most important indicators of macroeconomic performance. Unemployment arises due to the distortions in the supply of labor cause by the non-competitive wage differential. During the period from 1945 until at least 1968, unemployment rates in the major European economies were extremely low by todays standards. For instance in the United Kingdom, the average rate of unemployment for the entire period was about 1.8% of the labor force and in worst years it did not even exceed 2.5%. The main driving force was autonomous rather than policy related. These forces include waves of new products and processes, spread of trade and development around the world. However the cause of unemployment problem in Europe in comparison to the United States was their labor market institutions while the United States is far more superior due to the flexibility of their labor market. In this paper, determinants of unemployment in US are the concerns with economic growth as the main concern. Economic growth of a nation is the increase in a nations real output that occurs over time. In general, growth and unemployment are closely related as unemployment affects the growth rate through the scale of operation of an economy. Besides that, FDI inflow and inflation are taken into account altogether to identify the relationship towards the unemployment rate. 1.1 Background As unemployment is one of the most important economic indicators, the unemployment rate provides useful information such as how the labor market works as well as the percentage of human capital that is not used in the production process, which is especially crucial towards policy makers. Consequently, it is important to analyze the factors that impact the unemployment rate regardless short or long term perspective. The United States of America is a developed country which has one of the largest population and production in the world (Encyclopedia, 2010). As unemployment are explained by structural factors mainly by inflexible labor market. One may wonder the about the impact which economic growth, inflation and FDI have on the unemployment rate of the United States of America as the clutches of unemployment are hard to escape even for a develop country, especially for US which possesses by far the most flexible labor market. As a case study, the United States of America has been chosen as the research country. United States of America is reckoned to be particularly appropriate as United States of America labor market has proven by all accounts to be more dynamic in the sense of a higher level of job turnover, resulting in high vacancy levels at any point in time. Recently, unemployment rate in the United States of America has been found to be as high as 9.6% as of August 2010 compared to the 4. 1% ten years ago (Bureau of Labor Statistics, 2010). In the mean time the real GDP growth in 2000 was at 4.14% when the unemployment rate was 4.1% while the real GDP growth in 2003 was at 2.49% when the unemployment rate was 5.8% (Bureau of Labor Statistics, 2010). From here, it can be seen that unemployment rate moves in the opposite direction of economic growth, yet there were different versions of results concluded by different previous researchers. 1.2 Problem Statement Unemployment has been a famous macroeconomic variable that researchers tend to use to study on but even with so many researches carried out, some of the results obtained are not consistent with one and another. For instance, the debates among Monetarist and Keynesian views of unemployment as well as the new contributions of Lucass approach and new Keynesian Economics shows that there was no reason to account for growth in the unemployment model. However, a significant innovation occurred with Pissarides'(1990) formulation of an unemployment theory in equilibrium. In many previous attempts, he formalize a unique framework to study the labor market dynamic perspective, providing useful tools to analyze both long and short run unemployment. Pissarides also introduced a first link between long run unemployment and growth which matches the neoclassical framework of economic growth. ( Pissarides, 1990 Ch. II) In the case of US, its economy began its current economic recovery in December 2001. However, rather than experiencing employment growth, not only did the unemployment rate increase but the number of new jobs created in the economy actually declined significantly during the first year of the recovery (Seyfried). Thus this paper is conducted so as to affirm the relationship of economic growth has on the unemployment rate of the country. As some results obtained by past researchers showed that economic growth impacts unemployment whereas the others came to a conclusion that unemployment causes economic growth whereby the existence of Granger Causality relationship is quite possible. In this study, economic growth, inflation and FDI serves as explanatory variable to determine the relationship towards unemployment rate in the United States of America. 1.3 Objectives This study aims to investigate the determinants of unemployment rate in the United States of America with economic growth as the main concern in addition with inflation and FDI (foreign direct investment) to further assure that it is coherent with the results obtained from previous studies. 1.3.1 Specific objectives This paper aims to examine the relationship between economic growth, inflation and FDI towards the unemployment rate. On the other hand, this paper serves to probe further into the relationship between economic growth, FDI, and inflation towards unemployment to sustain the existence of granger causality relationship. 1.4 Significance of study The contribution of carrying out this study is to allow policy makers to have an insight of unemployment so as to allow them to decide on suitable policy that will help bring down the unemployment rate while sustaining appropriate inflation level and attract sufficient FDI inflow. The results generated will help provide insight to the nature of the relationship between economic growth, inflation, and FDI towards unemployment. It would be useful to policy makers to know the rate and relationship of economic growth as it is necessary to reduce the unemployment rate, or at least keeping it from rising. Moreover, in previous studies, FDI is found to have impacted the unemployment rate indirectly through spillover effects from economic growth. In this study, however, FDI is incorporated directly to affect unemployment growth; therefore the effectiveness of the implemented policy will be taken into account more effectively. CHAPTER 2: Literature Review 2.1 Conceptual Model According to Alexopolous (2003), in the case where there is technological growth in the economy, families will increase their investment in capital, which in turn increase the amount of family purchased consumption workers receive over time. As a result, firms optimally increase the wage rate proportionately in order to prevent workers from shirking on the job. Therefore, the rate of unemployment along the balanced growth path will not change over time, since the marginal product of labour and the marginal cost of labour grow at the same rate. Based on De Groot, in general, growth and unemployment are intimately related for two reasons. Unemployment affects the scale of operation of the economy and thereby the growth rate. Growth affects inter-temporal decisions of workers about where to allocate on the labor market once they are laid off, and thereby it affects equilibrium unemployment. According to Brecher (2007), rapid economic growth and FDI, accompanied by higher per capita income, usually increase output growth. Thus, domestic firms and foreign multinational corporations will demand more labour force with skills to create products. Hence, economic growth can promote future employment growth for labour force based on new Keynesian theory of the output-inflation tradeoff. Some studies found that overseas investment replaced domestic employment in developing countries; however, the same result did not happen in developed countries. Tremblay (2007) pointed out that based on classical economic theory, the Phillips Curve illustrated long-run tradeoff between unemployment and inflation. There is an inverse relationship between inflation and unemployment, that is saying inflation will rise when unemployment decrease and vice-versa. Futhermore, Luciano Fanti and Piero Manfredi (2003) mention that the neoclassical Solow model, which still provides excellent econometric fits and shows a globally stable positive growth equilibrium, but also shows two restrictive features as regards the scope of this paper: (1) it does not take into account the stylized fact of the existence of unemployment, which is generally not only positive but also strongly fluctuating; (2) in such a model fluctuations have never been endogenously determined Meanwhile, Martin Zagler (2006) noticed that the cost associated with economic growth is structural unemployment, as structural change destroys jobs in one firm and creates jobs in another. The source of unemployment is the rate of intra-sector structural change associated with faster economic growth. Besides, Bonatti (2007) says that an increase of the workers influence on the political process may raise the fraction of GDP allocated to finance the welfare state, thus leading to a higher unemployment rate and to a lower growth rate. The research work done by Chang (2007) noticed that when the degree of trade openness of Taiwan is larger, the unemployment rate of Taiwan will increase, this is because the young men and young women in Taiwan desire to extend their education in working age. According to Phillips (1998), the negative relationship between inflation and unemployment can be explained through governments expansionary policy to increase the consumption level of the citizens. As labor market tightens, unemployment rate will fall as money wages tended to rise more rapidly. Unemployment will then increase as government tries to control the inflation rate. This is because the increment in wages is closely related with the increase in price. Therefore, the trade-off between these two variables can be seen. 2.2 Methodology Effects panel regression methods were used by Zagler (2006) on the relationship between economic growth and unemployment. Moreover, Zagler (2006) checked his estimated model with the unit-root test to test the stationary of the model. In order to obtain information about the relationship between inflation and unemployment, the procedure of den Hann was employed by Bae (2006), which has the advantage as no assumptions about the order of integration in the variables of interest is required. The procedure estimates a vector regressions (VAR) model and analyzes the correlations of VAR forecast errors of inflation and unemployment at long horizons. Chang (2007) used vector autoregression method of variance decomposition and impulse response function analysis are applied to analyze various relationships among foreign direct investment (FDI), economic growth, unemployment and degree of openness in Taiwan. Besides that, he also uses the unit root test of augmented Dickey-Fuller (ADF and KPSS) test to examine the stationary properties of the economic time series. The appropriate lag-length in the ADF regression is selected by minimizing the Akaikes information criterion (AIC). He also uses co-integration test to determine whether there exists a long-run equilibrium relationship among variables and weak exogeneity, and multivariate Granger-causality test to determine their causal direction in the short-run between all variables. Besides, he also has applied the VAR technique of variance decomposition and impulse response function analysis to analyze various inter-relationships between FDI, unemployment rate and GDP variables in the case of Taiwan from the period of 1981 to 2003. Meanwhile, Eric Heyer, FrÃÆ' ©dÃÆ' ©ric ReynÃÆ' ¨s, Henri Sterdyniak (2006) present the results of the DF-GLS unit root test to test the growth rate of consumer price and also unemployment rate. 2.3 Empirical Result Zagler (2006) has carried out a research which empirically investigated the link between economic growth and unemployment, using micro econometric evidence for the United Kingdom. The results generated showed a significant and negative relationship between unemployment and economic growth. According to the result generated by Muscatelli and Tirelli (2001), it is proven that there is a negative relationship between economic growth and unemployment as Japan, Germany, Italy, France and Canada. This result is generally in favour of those theories which predict a negative linkage between unemployment on economioc growth Besides, Pehkonen (2000) stated that a fall in GDP has significant relationship with unemployment as a drop in the GDP in Finland leads to an increase in the unemployment since demand for labor have shrunk. Therefore, Pehkonen (2000) concluded that unemployment would increase as a result of a decrease in economic growth. Meanwhile, Mitra and Sato (2007) found that the major links between external scale economies and growth are perceived in terms of technical efficiency, and higher growth is taken to reduce the unemployment rate. Futhermore, Scahaik and Groot (1998) found that the unemployment and economic growth relationship in imperfect competition economy and different periods, where structural changes occur, has a negative correlation and effect of different degrees through testing the structural stability. Chang (2007) proved that economic growth as well as FDI have negative effects on unemployment as FDI are expected to generate economic growth by encouraging the expansion of trade and foreign investment. In addition, according to Solows growth theory, employment for labour force with skill can further promote economic growth and this can be verified by Taiwans economy model. Okuns law stating that reducing unemployment for labour force can promote further economic growth is then verified. Furthermore, unemployment is very sensitive to changes in GDP and vice versa, which does lend support that rising economic growth can obviously affect unemployment for labour force. shock of unemployment rate has negative effect on economic growth . He also mentions that the shocks in economic growth and FDI inflow decrease the unemployment rate. This means that rapid economic growth and FDI inflow, accompanied by higher per capita income can promote future employment growth for labour force. In the research study of Meckl (2001), correlation between growth and unemployment is shown to be positive if the research sector is of the high-wage sector in the economy, and negative if the research sector is the low-wage sector. Arico (2003) has already observed that the rate of growth is negatively related with the rate of unemployment. If the growth rate increases, it will decrease the net rate at which the stream of profits is discounted. For each firm the entry will result less costly. More vacancies will be created, reducing the unemployment rate. (Capitalization effect).On the other hands, It will reduce the life-time of each firm, by increasing the price for human capital. Each innovation will generate fewer vacancies than before. That will be reflected in an increase of the rate of unemployment. (Indirect creative destruction effect). Besides, Fanti and Manfredi (2003) has shown a negative relation between unemployment and growth , though we should also mention the positive relation between unemployment and growth obtained in the particular creative disruption context according to Schumpeters idea. Fanti and Manfredi alsomshows a surprising relation between unemployment and growth (via effects on population which is an endogenous engine of growth): this relation can be either positive or negative depending on the relative levels of cost of childrearing of workers and unemployed persons and the level of unemployment benefits. Meanwhile, Bonatti (2007) noticed that reduction of government transfers in favor of the workers allows decreasing the ratio of total tax revenues to GDP, thus monotonically increasing the growth rate and leading to a lower unemployment rate. CHAPTER 3: RESEARCH METHOD 3.1 Data Analysis 3.1.1 Unemployment Rate In this study, unemployment rate is the main study which was examine by using some explanatory variables. According to BLS, Bureau of Labor Statistics, (2009) those people who are with jobs can be considered as employed. On the other hand, a person will be classified as unemployed if they do not have a job, have actively looked for work in the prior 4 weeks, and are currently available for work. Dixon Shepherd (2002) stated that the unemployment rate can be considered as one of the most important indicators of macroeconomic performance in a country. The data of unemployment rate is obtained from the Bureau of Labor Statistics (BLS) which if measured in percentage from those people who are 16 years old and above from year 1970 to 2007. The method which BLS used to calculate the unemployment rate in United States is: X 100% 3.1.2 Real Gross Domestic Product Real gross domestic product (Real GDP) in a country can be measured by the total output value of goods and services which produced from the domestic labor in the country in a given year, expressed in base-year prices. In this study, it is expected that there is a negative relationship between the Real GDP and unemployment rate in United States. The source of the United States Real GDP data is from the World Bank World Development Indicators and International Financial Statistics of the IMF. On the other hand, the data obtained was converted to a 2005 base year. The formula to calculate the data of United States Real GDP is as below: 3.1.3 Foreign Direct Investment Foreign direct investment (FDI) is a kind of investment which is made to serve the business interest of the investor in a company which is in a different nation distinct from the investors country of origin. An example of FDI is a foreign company comes into a country to build or buy a factory and run a business there. Many economists believe that FDI is good for an economy, because it provides domestic job opportunities and increase domestic capital. In this study, net inflows of foreign direct investment in the measurement of current US Dollar are used. A net inflow of foreign direct investment is the total amount or value of the investment flow into United States from foreign investors to operate their business in United States and negative relationship between foreign direct investment and unemployment rate is expected in United States. 3.1.4 Consumer Price Index Consumer price index (CPI) is measured that examines the weighted average of prices of a basket of consumer goods and services in a country, such as transportation, food, rental fees and utilities fees. CPI is one of the measurements of inflation rate. According to Bureau of Labor Statistics (BLS), the prices for the goods and services used to calculate the CPI are collected in 87 urban areas in United States from about 23,000 retail and services establishments. The CPI data used in this study included all consumer items in United States from year 1970 to 2007. 3.2 Research Framework 3.2.1 Unemployment rate and Real Gross Domestic Product Based on the study, unemployment and real gross domestic product is expected to be negatively related. Edward (2007) stated there is a negative relationship between real gross domestic product and unemployment because of the theory of Okuns law. According to Okuns law, 1% increase in the unemployment rate will decrease GDP by 3%. However, Christopher (2010) said that, Okun coefficients can change over time because the relationship of unemployment to output growth depends on laws, technology, preferences, social customs, and demographics. 3.2.2 Unemployment and Consumer Price Index Consumer price index is one of the most frequently used statistics for identifying periods of inflation or deflation. This is because large rises in CPI during a short period of time typically denote periods of inflation. Therefore, we expect that there is an inverse relationship between the rate of unemployment and rate of inflation. According to the Phillips Curve theory, if the unemployment is high, inflation tends to be low. The diagram below shows the Phillips curve. Inflation Phillips curve Unemployment However, the result shows a positive relationship in our regression model. This problem will occur because of the multicolinearity problem in our regression model. But when one independent variable by one independent variable with the unemployment is tested, negative sign for consumer price index and unemployment are obtained. Bae (2006) stated that there is a positive long run relationship between unemployment and inflation. 3.2.3 Unemployment and Foreign Direct Investment In this study, inflow of foreign direct investment were expected to affect the unemployment rate significantly and expected that foreign direct investment has a negative long run relationship with unemployment. Foreign direct investment will increase job opportunities so, unemployment rate will decrease. Shu (2007) stated that FDI have negative effects on unemployment as FDI are expected to generate economic growth by encouraging the expansion of trade and foreign investment. 3.3 Econometric Methodology 3.3.1 Introduction This chapter consist the used of the method to examining the relationship between the unemployment and economic condition in United State by using the time series data ranging from the year 1970 to 2007. First, the result testing will start with the test of stationary by using Augmented Dickey-Fuller unit root test and proceed with the cointegration test. Secondly, the Multiple Regression Analysis and several ways to detect the assumption of the Classical Linear Regression Model (CLRM). The multicollinearity is used to test the correlation analysis. Breusch-Godfrey Serial Correlation LM Test is used to test the existence of serial autocorrelation, Autoregression Conditional Heteroscedasticity Test is used for testing the heteroscedasticity variance of error of the model and Ramsey RESET Test is used to detect the linearity regression and misspecification error. Unemployment = f (RGDP, FDI, CPI) RGDP = Real Gross Domestic Product FDI = Foreign Direct Investment CPI = Consumer Price Index The change in unemployment is our main study that we want to examine with using a few of variables which are RGDP (Real Gross Domestic Product), FDI (Foreign Direct Investment) and CPI (Consumer Price Index). y = ÃŽÂ ²0 + ÃŽÂ ²1Ln (RGDP) + ÃŽÂ ²2 (CPI) + ÃŽÂ ²3 (FDI) + Econometric Model with Expected Sign: = ÃŽÂ ²0 + ÃŽÂ ²1L (RGDP) + ÃŽÂ ²2 (CPI) + ÃŽÂ ²3(FDI) (-ve) (-ve) (-ve) Where +ve indicates that there is a postive relationship between the explanatory variable and dependent variable. On the other hand, -ve indicates that there is a negative relationship between the explanatory variable and dependent variable 3.3.2 Unit root A unit root test is used to examine whether a time series variable is stationary. In the model, T-statistic, F-statistic and R-squared are used to determine to ensure the validity of the test statistics is stationary. The result will become spurious regression problem if the non-stationary series in the ordinary least square (OLS) regression is used. Spurious regression result in high significant T-statistic and highly value for the coefficient of determination R-squared, and the R-square is larger than Durbin Watson. Therefore, if the stationary does not hold, estimate is not consistent and result will be misleading. To avoid the spurious regression problem, the Augmented Dickey-Fuller test (ADF) is used to examine the stationary of the variable. An Augmented Dickey-Fuller test (ADF) is used to test for a unit root in a time series sample. The Augmented Dickey-Fuller (ADF) statistic used in the test is a negative number. Therefore, the more negative value is, more power the rejection of the hypothesis that there is a unit root at some level of confidence. The equation for Augmented Dickey-Fuller (ADF) test Where ÃŽÂ ± is a constant, ÃŽÂ ² is the coefficient on a time trend and p is the lag order of the autoregressive process. ÃŽÂ ± = 0 and ÃŽÂ ² = 0 corresponds to modeling a random walk and ÃŽÂ ² = 0 corresponds to modeling a random walk drift. By including lags of the order p, the ADF formulation allows for higher-order autoregressive processes. This means that the lag length p needs to be determined when applying in the test. One possible approach is to test from high orders and examine the t-value on coefficients. The criterion such as the Akaike information criterion (AIC), Schwarz-Bayesian information criterion (SBIC) or the Hannan-Quinn information criterion (HQIC) test is used to examine the lag length. 3.3.3 Granger Causality The Granger Causality test indicates that a time series Y is said to be Granger caused by X if X helps the prediction of Y or equivalently if the coefficients on the lagged X are statistically significant. Granger Causality shows two-way causation in the case. X Granger causes Y and Y Granger causes X. It usually through a series of t-tests and F-tests on lagged values of X and lagged values of Y. 3.3.4 Multiple Regressions The ordinary least squares (OLS) or linear least squares are a method to examine the unknown parameters in a linear regression model. It is used to assume the distribance, ui. According to Gujarati (2003), ui stands for the normal distribution representing zero mean and constant variance, à Ã†â€™2 in the multiple regression models. With the normality assumption, OLS estimators 1, and 2 are linear functions of ui. Therefore, if ui are normally distributed, so 1,and 2 will make hypothesis testing more straightforward. OLS estimators of the partial regression coefficients are identical with the maximum likelihood (ML) estimators. There are the best linear unbiased estimators (BLUE). Besides, the least-square estimators are best unbiased estimators (BUE); it means that they have minimum variance in the entire class of unbiased estimators. 3.3.5 Multicollinearity Multicollinearity shows the two or more independent variables in a multiple regression model are highly linearly related. The multicollinearity test is perfect if the correlation between two independent variables is equal to 1 or -1. Multicollinearity will occur when there is a strong linear relationship among two or more independent variables. The equation below is refer the variables is perfectly multicollinear if there exist one or more exact linear relationships among some of the variables. Estimates for the parameters of the multiple regression equation is The ordinary least squares estimates include inverting the matrix XTX where, It indicate that if the linear relationship (perfect multicollinearity) is exactly with the independent variables, the rank of X is less than k+1 and the matrix XTX will not invertible. One of the detection of multicollinearity is used detection-tolerance or the variance inflation factor (VIF) for multicollinearity where R2j is the coefficient of determination of a regression of explanatory j on all the other explanators. Tolerances of less than 0.20 or 0.10 or a VIF of 5 or 10 and above reveal a multicollinearity problem. 3.3.6 Breusch-Godfrey Serial Correlation LM Test Breusch-Godfrey Serial Correlation LM test is a test of autocorrelation that is basically allows for nonstochastic regressors such as the lagged values of the regressand; higher-order autoregressive schemes such as AR (1), AR (2), etc and higher-order moving averages of white noise error terms such as t. Two variable regression models to illustrate the test, regressors can be added to the model and also lagged values of the regressand can be added to the model. Yt =ÃŽÂ ²1 +ÃŽÂ ²2Xt +ut The error term ut assume that the pth-order autoregressive, AR (p), Ut = ptut-1 + ptut-2 + à ¢Ã¢â€š ¬Ã‚ ¦+pput-p + t. where t.is a white noise error term. The null hypothesis H0 can be show as Ho: p1 = p2 = à ¢Ã¢â€š ¬Ã‚ ¦ = pp = 0 (no autocorrelation) At 5% significant level, if the computed p value of Chi-square is less than Chi-square tests, do not reject the null hypothesis, meaning that there is no autocorrelation problem. If computed p value of Chi-square is more than Chi-square tests, reject the null hypothesis, meaning that there is autocorrelation problem. 3.3.7 Autoregressive Conditional Heteroscedasticity Test In econometrics, Autoregressive Conditional Heteroskedasticity (ARCH) model assume that the variance of the current error term is related to the previos one. Autoregressive Conditional Heteroskedasticity model is used to model the time series with time-varying volatility such as stock price. 3.3.8 Specification error Ramsey Regression Equation Specification Error Test (Ramsey RESET test) is used to examine the specification error. The specification test for the linear regression model. More specifically, it is used to test the specification error in the equation. As the result, if the non-linear combinations of the independent variables have any power in explaining the dependent variable, means that the model is mis-specified. Consider the model Ã…Â · = E {y | à Ã¢â‚¬ ¡ } = ÃŽÂ ²Ãƒ Ã¢â‚¬ ¡ The Ramsey test is used to test whether the (ÃŽÂ ²1à Ã¢â‚¬ ¡)2, (ÃŽÂ ²2à Ã¢â‚¬ ¡)3à ¢Ã¢â€š ¬Ã‚ ¦,(ÃŽÂ ²k-1à Ã¢â‚¬ ¡)k has any power in explaining y. The Ramsey test is executed by calculate the following linear regression Ã…Â · = ÃŽÂ ²Ãƒ Ã¢â‚¬ ¡ + ÃŽÂ ²1Ã…Â ·2 +à ¢Ã¢â€š ¬Ã‚ ¦+ ÃŽÂ ²k-1Ã…Â ·k + ÃŽÂ µ After examine the test, the means of the F-test is to determine whether ÃŽÂ ²1 through ÃŽÂ ²k-1 are zero. If the null hypothesis reveals that all regression coefficients are zero, means that the null hypothesis cannot be reject, the Ramsey test is unable to detect any misspecification. If the null hypothesis is rejected, means that the model is misspecification. 3.3.9 Jarque-Bera Test of Normality Jarque-Bera test of normality is used to test the normally distributed. It is large-sample or an asymptotic test and based on the OLS. The test first calculates the skewness and kurtosis measures of the OLS residuals. JB = n Where the n = sample size, S = skewness coefficient, and K = kurtosis coefficient. The normally distributed variable, S is zero and K is three. Hence, the Jarque-Bera test of normality is a test of the joint hypothesis that S and K are zero and three, respectively. Therefore, the value of the Jaque-Bera statistic is expected to be zero. For the null hypothesis the residual is normally distributed, asymptotically (i.e., in large samples) the Jarque-Bera statistic gives the chi-square distribution with two degree of freedom showed by Jarque and Bera (Gujarati 2003) For the alternative hypothesis the residual is not normally distributed. At 5 significant levels, computed p value is less than Jarque-Bera statistic, we can reject the null hypothesis that the residual is not normally distributed whereas computed p value is more than Jarque-Bera statistic, we do not reject the null hypothesis that the residual is normally distributed. CHAPTER 4: RESEARCH RESULTS AND INTERPRETATION 4.1 Introduction This chapter consists of the results and interpretation of the relationship between

Utopia in Gulliver Travels and Paradise Lost Essay -- comparison compa

The Inconceivable Utopia in Gulliver Travels and Paradise Lost  Ã‚      In Jonathon Swift's Gulliver Travels and in John Milton's Paradise Lost, the reader is presented with two lands representing utopias. For Swift this land is an island inhabited by horse like creatures called Houyhnhnms who rule over man like beasts called Yahoos. For Milton, the Garden of Eden before the Fall of man represents Paradise. In it, Adam and Eve are pure and innocent, untested and faithful to God. The American Heritage Dictionary defines utopia as "an ideally perfect place, especially in its social, political, and moral aspects." And while Houyhnhnm Land and the Garden of Eden may seem like ideally perfect places, they are not. Indeed, they contradict our ideas of utopia.    Our fascination with utopias stems from our attraction to and pursuit of progress within our own society. We study utopias with the hope that our society will someday evolve into one. But what often goes unnoticed is that if our society improves enough to become utopian, it won't be able to improve any longer. Hence, it will be rigid and unchanging, the complete opposite of what it was as it evolved to its elevated state. This is an awful truth for us because we place value and virtue in the ideas of desire and progress. Our reason tells us: once in an ideal land, desire cannot simply cease to be, because desire is part of our human nature. And our reason is right. An ideal society should accentuate our human nature, not suppress it. As we desire a perfect society we know that a perfect could not exist without our desire. And as long as we desire, we hope for progress. The idea that an utopia wouldn't allow such progress to occur is enough to make us stop believing in utop... ...ames Holly. "Milton and the Art of War." John Milton, Poet and Humanist: essays by James Holly Hanford. Cleveland: Press of Western Reserve U, 1966. 185-223. Lock, F. P. The Politics of Gulliver's Travels. Oxford, Great Britain: Oxford University Press, 1980. Milton, John. Paradise Lost. Ed. Roy Flannagan. New York: Macmillan, 1993. Patrides, C.A. Milton and The Christian Tradition. (Oxford: Clarendon Press, 1966) Revard, Stella Purce. The War in Heaven. Ithaca and London: Cornell University Press, 1980. Rodino, Richard H. "The Study of Gulliver's Travels, Past and Present." Critical Approaches to Teaching Swift. New York: AMS Press, 1992. Swift, Jonathan. Gulliver's Travels. Mahwah, NJ: Watermill Press, 1983. Tuveson, Ernest. (Ed.) Paradise Lost: A Collection of Critical Essays. Englewood Cliffs, New Jersey: Prentice-Hall, Inc., 1964.

Outline: Police and American Civil Rights

Ethnicity and the Police Part I: Outline Ethnicity and the Police Part I: Outline (1) Introduction (a) Police corruption (b) Citizen complaints relative to ethnicity (2) Body (a) Police corruption i. Prevalence of police corruption ii. High levels of police corruption iii. Several Cases of police Misconduct (b) Violation of Amendments i. Abuse of power (c) Citizen complaints against the police i. African American civil rights groups (d) Controlling Police Officer Behavior in the Field i. Using what we know to regulate police ii. Initiated stops and prevent racially biased policing 3) Conclusion (a) Police corruption and citizen complaints relative to ethnicity Over the years, the police have been involved in unethical events that have made the community no longer trust them. These events will never be erased in the eyes of society. The worst part is that now the racial acts, abuse of authority and violation of human rights are over the hot spot. With all these unethical acts, the pol ice department is leaving the worst impression in many minority communities, because of the corruption and brutality that comes from the police patrolling the areas.The police should leave a positive impression with the communities that they serve, this way the police will be able to ask the community for help when needed. Peacemaking is the basic duty of the police force; if police is caught doing things that is not ethical in the community eyes the situation in the community will not change. The public perception of the police is the criminal justice system should work on the factors that cause the public to lower their trust in the way police treats their communities.Making better police in the community can result if there is better cooperation from the criminal justice system. The way police handles combating crime and brutality most attempts to redeem police image would involve education for both public and the police on the effectiveness crime control measures. References Sta ples, R. (2011). WHITE POWER, BLACK CRIME, AND RACIAL POLITICS. Black Scholar,  41(4), 31. Taslitz, A. E. (2003). RESPECT AND THE FOURTH AMENDMENT. Journal Of Criminal Law & Criminology,  94(1), 15.

Parley and Parlay

Parley and Parlay Parley and Parlay Parley and Parlay By Maeve Maddox Suzanne Raymer has suggested a post on parley versus parlay. Both words may be used as either noun or verb. As a noun, parley can mean speech or conversation. Its most common use is to mean speech between opposing sides, a conference with an enemy to discuss terms. As a verb it means to discuss terms, or hold discussion with. Parlay is a betting term. As a noun, it means a cumulative series of bets. The winnings of subsequent bets are bet again. As the bettor continues to win, the gains continue to increase. As a verb, parlay means to use the winnings from a previous bet to make another bet. Parley [prlÄ“] is from French parler, to speak. Parlay [prlÄ ] comes from French parole which comes from Italian parole, words, promises. Parlay entered English in 1701 as a term in the card game faro. The gambling term took on the meaning to exploit to advantage in 1942. Uses of parlay: David Lusterman parlayed a $10000 investment into a company with $1.2 million in revenues Witness Bill Blount parlayed political skills into a mega-dollar business She parlayed a $350 investment into a multi-million dollar business†¦ Uses of parley: Governors seek fresh parley with teachers German politicians plan June parley with Hamas minister For the moment they are parleying with the kings brother-in-law Want to improve your English in five minutes a day? Get a subscription and start receiving our writing tips and exercises daily! Keep learning! Browse the Vocabulary category, check our popular posts, or choose a related post below:50 Slang Terms for MoneyConnotations of 35 Words for Funny People20 Criminal Terms You Should Know

Trodden Weed

Trodden Weed Introduction The art piece Trodden Weed is a painting depicting a man’s boots walking on a patch bearing what appear to be weeds. It was created in 1951 by the artist Andrew Wyeth, who later came out to explain that it was self-portrait.Advertising We will write a custom critical writing sample on Trodden Weed specifically for you for only $16.05 $11/page Learn More According to Wyeth, he had undergone an eight-hour surgical operation on his lung and during the recuperation period, he spent some time walking trying to regain his strength (Wyeth 1). It was during one of these recovery walks that he took some time to rest and as he was looking down at his feet, it occurred to him that he had been crushing things under his feet (Wyeth 1). Having gone through an operation, during which his heart was said to have stopped once, Wyeth had come to appreciate the importance of life. That is why he found it disheartening that he had been killing without knowing and he proceeded to put this message on a painting (Wyeth 1). Writing about a work of art is regarded as one of the best aids to fully understanding it. This essay seeks to analyze the painting titled Trodden Weed by Andrew Wyeth, using the four steps of art criticism. Description The painting was created using the medium Tempera on Wood. Tempera is a painting mixture that is created by combining colored pigment with a binding medium (traditionally egg yolk). Tempera once applied on a material dries fast and becomes permanent.Advertising Looking for critical writing on art and design? Let's see if we can help you! Get your first paper with 15% OFF Learn More Wyeth is counted among the few 20th century American artists, who specialized in Tempera art. When painting using Tempera, a small amount of pigment paste is placed on a palette then some drops of distilled water are added. The binder (egg yolk) is then added to mixture depending on the desired consiste ncy. Wyeth probably chose this media because of its longevity. Analysis The painting was done from a second-person (observational) point of view. It was as if Wyeth was looking at another person’s feet when painting. In terms of balance, the boots and the weeds, the primary subjects of the painting, have been given prominence with each taking almost half of the entire painting. The boots give weight to the top left side of the painting, while the weeds cover every other section apart from a small bit on the top right where a portion of the sky is showing. In order to create a three-dimensional feel to the painting, the artist, played around with the element of perspective. The sky is shown peeping at a distance, with the path that Wyeth had charted in his walk presenting in a tapering line that widens towards the foreground. By discriminately shading some parts and leaving others out, Wyeth was able to distinguish the texture of various components. He also used different type s of strokes to make some elements appear smooth and others rough. For instance, in the grass on the foreground, Wyeth used long and rough strokes, while on the trousers he made the strokes short and fine. The lighting of the painting, which appears to have been well thought-out, indicates that the walk was happening in the afternoon.Advertising We will write a custom critical writing sample on Trodden Weed specifically for you for only $16.05 $11/page Learn More The shade and tone of the painting is earthy with the color selection yielding a painting that does not scream for attention. The mood of the painting is that of solace and loneliness. From the first look, one can tell that the subject is walking alone. The background, which stretches all the way to the horizon, does not have other people clearly indicating that the subject has not come across anyone in his long walk. Interpretation From a personal point of view, the theme of the work is the differ ence between the strong and weak. In any society, stronger people tend to take advantage of the weaker ones, sometimes at will, for their own benefit. For instance, politicians in most countries enter parliament and change the laws to favor them at the expense of other members of the public. The walking legs clearly show the will of a strong living person to get from one point to another. The dead weeds show how the weak lose out when a stronger people opt to exercise their dominance on them. The long distance that the subject has been walking, causing damage, depicts the extent of destruction that one strong person can cause when placed against hundreds of weak individuals. Evaluation/Conclusion Had I not take time to critically study the painting I would have dismissed it as another pair of walking legs. However, after a committed study that was in part guided by external references, I have come to the conclusion that there is more to the painting than meets the eye. I now underst and deeply understand the style that was used in creating the artwork, as well as the circumstances that led to its creation. I am also in a position to give an informed interpretation based on the analytical process. This analytical process can be applied in different pieces of art to derive meaning.Advertising Looking for critical writing on art and design? Let's see if we can help you! Get your first paper with 15% OFF Learn More Wyeth, Andrew. Trodden Weed 1951. Web.

Research Methodology of the BMW Strategy

Research Methodology of the BMW Strategy An Overview This research aims at determining how the BMW brand strategy can influence the Chinese consumer behaviors in the Chinese E-car market. In the reviewed literature, the study already discussed the consumer decision-making process on the purchasing of the E-cars.Advertising We will write a custom report sample on Research Methodology of the BMW Strategy specifically for you for only $16.05 $11/page Learn More Besides, to make this study viable and empirically confirmable, the reliability of the primary results is a part of the study target. To receive an adequate answer in the goal of this research, the researcher will make the potential BMW Chinese consumers as its target group, based on the aims of the topic. More specifically, the researcher will sample 60 respondents from 10 different target groups, which will be from a stratified random sample. The researcher will analyze primary quantitative data using the computer-aided, SPSS system. Furtherm ore, the researcher will also collect secondary data, which will come from the published journals and from other pieces of literature to support the survey results. The Research Hypothesis The research hypothesizes that the brand reputation of the BMWi electric cars is low among the majority of the Chinese consumers. In the reviewed literature, the research noted that the perception of the Chinese consumers towards the foreign automobiles is considerably low. Moreover, the study analyzed how product information, brand personality, and brand associations influence the consumer’s perception about products. This hypothesis will help in identifying the strengths and weaknesses the BMWi brand. The study believes that the number of people interested in the BMWi electric vehicles is considerably low as the consumer’s attitudes are low towards the BMWi brand. Based on the reviewed literature, the study discovered that marketers measure consumer attitudes through the Rosenberg theory that contains two important variables. These variables include the instrumentality and the value of a product. This hypothesis is sufficient for assessing the perceived instrumentality and value of the BMWi E-cars in the Chinese automobile market.Advertising Looking for report on business economics? Let's see if we can help you! Get your first paper with 15% OFF Learn More The study assumes that majority of the aspiring BMW consumers are worried about the future of the electric-supported BMWi vehicles due to low trust. In the reviewed literature, marketing expert Frank Dophreide revealed that the BMW Group has failed to assist its consumers to distinguish between the old BMW models from the new E-car models. This construct will help in investigating the levels of trust among the Chinese consumers towards the BMWi brand. The study hypothesizes that the Chinese consumers cannot associate themselves with any of the BMWI brands because BMW has not reinfo rced the BMWi brand. Following the reviewed literature, the value-drivers model postulates that a brand experience is very meaningful for the consumer experiences. Therefore, reinforcing a meaningful and a different brand experience is essential. This hypothesis will assist the study to examine the attitudes of the consumers on their perceived brand experiences with the BMWi cars. Sociology and Scientific Dimension The intended research will hinge its foundation on the concept of sociology, in which the idea of the peoples way of living and their regular behaviors play important roles in this research. According to the researchers Auguste Comte, Hine, and Flemming, who invented the idea of sociology, the word sociology, literally means the continued cultural life of people (Babbie 2003). The research will take the approach of sociology, based on the idea that analyzing how the BMW brand strategy can influence the E-car consumer behaviors in the Chinese market, needs an understanding of the Chinese consumer behaviors and trends. Consumer behavior is a concept that directly associates with the concept of sociology in a manner that the behaviors of the consumers tell a lot about the cultural and societal values of a certain consumer group (Babbie 2003). In the concept of sociology, sociologists believe that social change can appear in a radical manner or through a regular process.Advertising We will write a custom report sample on Research Methodology of the BMW Strategy specifically for you for only $16.05 $11/page Learn More Radical and Regular Change The study assumes that social change can be in the form of a radical change perspective or a regular change perspective. A radical social change refers to a form of social transformation, in which people replace their conventional social behaviors in a quick manner and in an abrupt way (Babbie 2003). In a radical social change, people change their cultures, social behaviors, and their rou tine practices in a drastic manner and adopt postmodern behaviors straight away. Contrary to the radical social change, regular social change refers to a process of social transformation whereby people of certain cultural values transform into their cultural behaviors and societal routines in a systematic manner (Bracken 2010). The study shall use the regular change view in the process of finding an approach by which the BMW brand strategy will influence the consumer behaviors in the Chinese market. A regular change perspective will provide the BMW marketers with a systematic way of penetrating into the Chinese E-car market. The Scientific Dimension on Social Change The scientific dimension regarding sociological research entails the concepts of ontology, epistemology, human nature, and methodology (Bracken 2010). In this research, the four concepts comprise an integral part of analyzing how the BMW brand strategy can influence the behaviors of the E-car consumers in the Chinese mar ket. In the social science research, ontology is a modern philosophical term that refers to the manner in which research uncovers what entails reality and how people perceive this reality. According to Bracken (2010), the main purpose of social science research is to help people create an understanding of how people comprehend social reality and how their personal perceptions shape their behaviors in the reality they know. The BMW brand strategy meant to influence the Chinese consumers to adopt the BMW electric cars, targets to help the people understand the reality in the use of electric vehicles (Bracken 2010). The ontological perceptions of the Chinese consumers concerning the BMW i3 and i8 cars will give the BMW Group a chance to teach its E-car consumers. Methodologically, the intended research will also use an epistemological research approach. According to Bracken (2010), epistemology is a social science approach in which the research concentrates on what comprises a valid kn owledge and the way people can obtain that valid knowledge. In epistemology, researchers concentrate on the creation and dissemination of information to suit the people who need it most.Advertising Looking for report on business economics? Let's see if we can help you! Get your first paper with 15% OFF Learn More Methodologically, the research seeks to use the epistemological approach to help the Chinese consumers understand the need to embrace the BMW electric vehicles, and help them cease their conventional ideologies about the electric cars. The philosophy of human nature will also be integral in this research. In social sciences, human nature is complex and researchers tend to develop ontological approaches to examine the human nature. While trying to understand ontology, epistemology, and their association with the human nature, it is important to understand that there are two main ontological approaches namely the positivism and the interpretivism approaches. The study will use a positivist approach. The Positivism Approach A positivist research technique is a form of a systematic scientific approach that sees the world as being based on the unchanging, universal laws and the view that everything that occurs around us can be explained by knowledge of these universal laws (Mukherja Alb on 2009, p. 11). This study will employ the positivist paradigm of research because the research on the BMW brand strategy entails the use of manipulative and quantitative approaches in analyzing a research environment. According to Mukherja and Albon (2009), a positivist research yields high validity and reliability because it regularly assumes that the much-needed truth is always within the people. Therefore, since people have enough knowledge to inform research, the positivist approach believes in the quantitative research approach, which accurately helps to measure and quantify a certain phenomenon. In this proposed research, the positivist approach will help the researcher to quantify and measure the responses of the participants quantitatively, and to provide a high data validity and reliability through an appropriate sampling and instrumentation. The Research Approach Based on the philosophies of the ontology and epistemology approaches that informed the research to use the p ositivism paradigm, the research will use the quantitative research approach to collect data, analyze data, and discuss the results. According to Tewksbury (2009), quantitative research aims at measuring, quantifying, and investigating a phenomenon through the collection of numerical data that comes from the closed-ended questionnaires. Quantitative research aims at investigating a phenomenon through manipulative techniques as it views behavior to be regular and predictable. In this study, the researcher intends to use a quantitative method because the research will rely on the positivist approach in which the data involved will provide predictable the aspects. According to Tewksbury (2009), a quantitative research approach helps researchers to study human behaviors under controlled conditions. The research on the BMW brand strategy involves a review of the predictive situations that accompany the participants who will provide data concerning their perceptions about the BMW electric cars. The Research Design Quantitative researchers often use descriptive statistics to present quantitative data and descriptions in a convenient manner (Borman Dowling 2008). The intended research is going to use a descriptive form of research in which a survey approach that uses closed-ended questionnaires will be useful in the collection and analysis of the primary data. Descriptive studies according to the social science researchers are studies that focus on describing the research participants. Therefore, since the study intends to deal with the consumer behaviors of the Chinese BMW users, the descriptive research design will be suitable for describing their consumption trends, consumption attitudes, and their consumption culture. The research will use a quantitative research survey technique to analyze how the BMW brand strategy can influence the consumer behaviors in the Chinese market. A quantitative technique may sometimes involve large data, which ends up not providing c oncise findings. To help make the data concise and meaningful, the descriptive research will help the researcher synthesize the data. The Survey Method Historically, a survey was a kind of a research method that used an observation or an investigation to prove the truth about a phenomenon. However, nowadays a survey is a scientific research term that explains the process of collecting primary data from the selected individuals, or from a research sample. It should remain noted that a short period of 12 weeks spared for an academic research is a limitation for research. Therefore, a questionnaire survey method is the best chosen for the research, because questionnaires are easy to comprehend, take little effort to fill, and are capable of providing a huge amount of information in a little space. A self-made questionnaire made up of 23 questions will be appropriate for this research. According to Ledesma and Valero-Mora (2007), self-made questionnaires help researchers to collect data based on the research question to test the available assumptions. The survey will comprise an interview form of research, in which the researcher will engage directly with the respondents, and administer the questionnaires by hand. The Sampling Strategy Studies involving the ontological and epistemological approaches often involve analyzing certain aspects with the human population. A scientific research must always have a target population in which a study must gather the required responses to produce empirical facts about a study phenomenon. The targeted population of the study is the Chinese E-car consumer group. The theory concerning the use of electric vehicles in China has associated the Chinese E-car consumers with increased levels of adamancy and negative attitudes towards the electric cars, and especially those manufactured by the foreign companies such as the BMW Company. The study will use the Chinese E-car consumers as their target population to unravel the association between cultural perceptions against the BMW electric vehicles, and the consumption trends of the Chinese E-car users. The research targets about 60 respondents from different consumer groups, to provide data on the present Chinese consumer perceptions about the BMW electric cars. The proposed research intends to sample its targeted population using the non-probability sampling technique. This non-probability sampling believes in the critical theory that argues that the modern social structure contains people with varied traits. Non-probability sampling is a research approach used to acquire a sample size from a targeted population through a procedure that does not give the targeted people equal participation opportunities in the research. In this form of sampling, the research will adopt a quota form of non-probability sampling technique to sample the consumers based predominantly on their connection with the BMW cars. To be more specific, the proportional quota sampling strategy w ill apply in this proposed research. Based on its prior empirical evidence, the propositional quota sampling technique will be relevant in this research because it allows researchers to sample the respondents based on their unique characteristics, i.e. age, occupational statuses, situational experiences, social statuses, and economic statuses, among others. This study understands very well that the representation of women in the class of premium car owners in the Chinese population is relatively low than that of men. To ensure that the results remains reliable and logical based on the principles of the propositional quota sampling technique, the study will conduct a pre-visit or a reconnaissance study, which will help the researcher identify the representation gap between the women and men in the premium car ownership. The reconnaissance will take almost a month to the actual study, and the researcher will make frequent quota sampling to ensure that the sample is proportional via a 50-50 representation. During the reconnaissance period, the researcher will sample the 60 respondents based on their educational backgrounds, their income statuses, their ages, and most importantly, their experiences with the BMW brands. A quota sampling of this kind will allow the researcher to get the respondents with high legibility for participation. The Questionnaire Design In quantitative research, researchers collect primary data from the respondents using carefully selected data instruments. A quantitative survey relies on the collection of quantitative data that comes in the form of numerical values or statistical figures. In scientific research, the most appropriate data collection instrument that is suitable for the collection of quantitative data is the closed-ended questionnaire. Closed-ended questionnaires are capable of giving uniform results with high accuracy when appropriately applied in a quantitative research. The proposed research will use self-administered clos ed-ended questionnaires with a manipulative framework in which the respondents will only fit their responses using some fixed conditions. The structured or closed-ended questionnaires will have predetermined responses driven by the existing theories. The study will articulate the questionnaires using the Chinese language to yield better responses because most of the respondents may not be well conversant with English despite their high educational levels. Data Collection Procedure Just like any other scientific research, the study will use two forms of data namely the primary data and the secondary data. Primary data is a form of research data observed and gathered through a first-hand field experience. According to Driscoll (2011), primary research involves the actual collection of data through observations, interviews, and surveys. The most appropriate means of collecting primary quantitative data is through the surveys, which come through the structured questionnaires commonly kn own as the closed-ended questionnaires (Scotland 2012). Just like in the other forms of quantitative research, this study will rely on the surveys administered through the structured questionnaires to collect primary data from the 60 participants identified for the study. The importance of primary data in research is that primary data reinforces the theoretical assumptions and other empirical findings identified in the existing literature. This approach helps because primary data provides verifiable facts to validate the findings of a given research. Secondary Data Research is all about gathering and analyzing data to have a coherent conclusion. To reinforce and bolster the facts established in the primary data, researchers gather data from the peer-reviewed published journals, books, and from other relevant literature sources. According to Nicholson and Bennett (2008), data gathered from the peer-reviewed journal, the books, and other literature sources, where no significant first- hand experience is involved, is known as the secondary data. In this research, the researcher will use several secondary data sources including books, journals, and articles on genuine websites. The study proposed to use secondary data with an aim of strengthening the primary data collected since secondary data is normally capable of enabling a richer exploration of the research phenomena. In a carefully triangulated manner, the research will establish the most relevant secondary data through various internet searches. Data with verified empirical facts will be more useful in this proposed research. Data Analysis In a primary research, the collected data must undergo further synthesis and analysis to provide meaningful information that can enrich the research conclusion. According to Babbie (2003), the practice of social research where a quantitative approach plays a role requires an understanding of how to analyze the quantitative data that comes in the form of numeric data. The mo st reliable data analysis tool that quantitative researchers use is the SPSS data analysis tool (Scotland 2012). The SPSS research tool, which stands for the Statistical Package for Social Sciences, is a form of predictive analytics software that helps researchers to analyze quantitative data appropriately (George Mallery 2003). The software will be appropriate because the study will rely on data collected from the structured questionnaires where numerical data will be present (Scotland 2012). Additionally, the research will use the Excel system to support the SPSS software in analyzing some data that will be in numerical form but maybe with a different dimension. Ethical Considerations In the social science research, the collection of primary data often entails the use of human participants as subjects that provide empirical data of a study. The involvement of human beings as important research subjects that enrich a study in the collection of data often requires a close considera tion of the research ethics (Ledesma Valero-Mora 2007). The proposed research seeks to collect data from 60 participants who are all human beings. The study will ensure a maximum use of ethical principles in the collection, analysis, and dissemination of the primary data collection. Firstly, while collecting primary data will be an essential part of the research, respondents will participate in the study and give information upon their willingness and upon their discretion. In a diplomatic manner, this research understands that using coercion or intimidation to extract information from the research participants is unlawful and unethical. In the secondary data, the research will ensure a proper acknowledgment of the authors through proper document citation. Limitations The proposed research may face limitations because, within the targeted population, it is uneasy to detect the exact number of people with the knowledge about the BMW electric cars. Secondly, the area of study is Chin a, where the introduction of the electric cars has elicited sharp political and social reactions concerning the engagement of the foreign automotive companies in the Chinese automobile market. The inherent social attitudes and political influences are capable of influencing the response behavior of the participants (Tewksbury 2009). Locating the reliable participants is also another significant limitation to this research. The research requires the collection of data from 60 human respondents, who are either in motion with their vehicles or scattered somewhere within the large population. People with premium or personal cars are often uneasy to locate and engage them in a survey because they are either driving or busy with certain schedules. Moreover, BMW has a low brand identity in China, and the Chinese participants may not respond efficiently to some questions. Validity Reliability Since most of the social science studies often measure the human behavior using the positivist par adigm and empirical analytic approaches to discern the reality, the measurement instruments must always prove to be valid and reliable (Drost 2011). Due to the Chinese political and social influences against the foreign car brands, respondents are likely to provide biased information. To help reduce the chances of information biases, the study aims to use a self-made questionnaire, which can suitably counter this social dilemma, as the fixed responses will yield coherent answers (Drost 2011). First, the researcher should determine whether the questionnaire has a correct design and a clearly understandable design that is familiar to the respondents. Moreover, as Drost (2011) states, the researchers must determine whether the selected sample is suitable for the survey when handing out the questionnaire. Additionally, the researcher will make sure that the responses will not remain affected by external inhibiting factors through assuring the respondents of their confidentiality and res pect in the responses they will give. To help ensure high reliability and validity of the research data, the study will employ several test and data reliability measures to improve the validity and reliability of the collected data. In their study, Saunders, Lewis, and Thornwill (2007) discovered that for research to prove empirically correct, researchers must ensure that the instruments of data meet all the satisfactory levels of validity. The four satisfactory levels of data validity include the internal validity, the external validity, the construct validity, and the statistical conclusion validity (Drost 2011). To avoid problems related to the construct validity, just as Drost (2011) recommends, the researcher will ensure that the self-made questionnaires follow the guided principles of forming questionnaires, are scientifically verifiable, and have the proper structure. A researcher can ensure the validity of the data from a survey (Saunders et al. 2007). Before the respondents answer the questionnaires, there has to be a premise, in which the researchers need to know whether respondents have the idea about it. In the construct validity, if the respondents did not clearly understand any of the questions, the researcher will have the responsibility to explain it until they understand how to answer the questionnaire. Because this topic is about a hi-fi tech product, the number of male respondents may be higher than that of the female respondents. However, using a balanced proportion of male and female respondents for a reliable questionnaire is vital (Pogodzinski, Young, Frank Belman 2012). Thus, it is necessary to let respondents understand what the questionnaire includes. Based on the existing theory, several hypotheses are verifiable by the findings. The validity of hypotheses will be used to confront the observation that is conducted by the questionnaire. If hypotheses are not valid, further adjustments of the hypotheses will be necessary (Steele, Hami lton, Stecher 2010). To study the consumer behavior effectively, the researcher will write the questions in the Chinese language. Using the Chinese language to target the Chinese respondents will help to avoid language bias. References Babbie, E 2003, The Practice of Social Research, The Wadsworth Publishing, Belmont City. Borman, G Dowling, N 2008, ‘Teacher attrition and retention: A meta-analytic and narrative review of the research, Review of Educational Research, vol. 78, no. 3, pp. 4-13. Bracken, S 2010, ‘Discussing the importance of ontology and epistemology awareness in practitioner research, Worcester Journal of Learning and Teaching, vol. 1, no. 2, pp. 1-10. Castellan, C 2010, ‘Quantitative and Qualitative Research: A View for Clarity, International Journal of Education, vol. 2, no. 2, pp. 1-14. Driscoll, D 2011, ‘Introduction to Primary Research: Observations, Surveys, and Interviews, Readings on Writing, vol. 2, no. 1, pp. 153-174. Drost, E 2011, ‘Validity and Reliability in Social Science Research, Education Research and Perspectives, vol. 38, no. 1, pp. 105-123. George, D Mallery, P 2003, SPSS for Windows Step-by-step: A simple guide and reference, Allyn Bacon Publishers, Boston. Ledesma, R Valero-Mora, P 2007, ‘Exploratory factor analysis: Practical Assessment, Research Evaluation, vol. 12, no. 22, pp. 17-33. Mukherja, P Albon, D 2009, Research Methods in Early Childhood: An Introductory Guide, Rutledge Publishers, London. Nicholson, S Bennett, T 2008, ‘Transparent Practices: Primary and Secondary Data in Business Ethics Dissertations, Journal of Business Ethics, vol. 1, no. 7, pp. 1-10. Pogodzinski, B, Young, P, Frank, K, Belman, D 2012, ‘Administrative climate and novices intent to remain teaching, The Elementary School Journal, vol. 113, no. 2, pp. 1-18. Saunders, M, Lewis P, Thornhill, 2007, Research Methods for Business Students, Pearson Higher Ed, London. Scotland, J 2012, ‘Exp loring the Philosophical Underpinnings of Research: Relating Ontology and Epistemology to the Methodology and Methods of the Scientific, Interpretive, and Critical Research Paradigms, English Language Teaching, vol. 5, no. 9, pp. 9-16. Steele, J Hamilton, L Stecher, B 2010, Incorporating student performance measures into teacher evaluation systems, RAND Corporation, Santa Monica. Tewksbury, R 2009, ‘Qualitative versus Quantitative Methods: Understanding Why Qualitative Methods are Superior for Criminology and Criminal Justice, Journal of Theoretical and Philosophical Criminology, vol. 1, no.1, pp. 38-58.