EXAMPLE 2 Health and wealth

Figure 14.3 is a scatterplot of data from the World Bank for 2010. The individuals are all the world’s nations for which data are available. The explanatory variable is a measure of how rich a country is: the gross domestic product (GDP) per capita. GDP is the total value of the goods and services produced in a country, converted into dollars. The response variable is life expectancy at birth.

We expect people in richer countries to live longer. The overall pattern of the scatterplot does show this, but the relationship has an interesting shape. Life expectancy tends to rise very quickly as GDP increases, then levels off. People in very rich countries such as the United States typically live no longer than people in poorer but not extremely poor nations. Some of these countries, such as Costa Rica, do almost as well as the United States.

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Two nations are outliers. In one, Equatorial Guinea, life expectancies are similar to those of its neighbors but its GDP is higher. Equatorial Guinea produces oil. It may be that income from mineral exports goes mainly to a few people and so pulls up GDP per capita without much effect on either the income or the life expectancy of ordinary citizens. That is, GDP per person is a mean, and we know that mean income can be much higher than median income.

The other outlier is Liechtenstein, a tiny nation bordering Switzerland and Austria. Liechtenstein has a strong financial sector and is considered a tax haven.