# Possible regression biases with GDP [x] vs Health expenditure [y] (both per capita)

I am regressing per capita health expenditure on per capita GDP. I have 3 data columns (health expenditure, gdp, population)

So my regression function is healthexpenditure/population = b0 + b1.(gdp/population)

1) My question will be what are the possible problems of this model? Is dividing dependent and independent variable with population number problematic? This is a theoritical question, I want to explore possible biases in my simple model.

2) Suppose that I have plotted my data and it looks like this. Do you see a problem that are related?

• Regarding your first question, if you divide both sides of an equation by the same constant, the relationship will not change. So the slope of the relationship between your dependent and independent variables will not change. What will change is the value of the intercept term, if you have one in the regression equation. May 2, 2019 at 7:09
• hmmm. suppose that i have two models, suppose that my first model is on per capita basis (y and x are divived by population), my second model is not on per capita basis (y and x are not divided by population). which is a better model to use in terms of economic intuition? May 2, 2019 at 9:19