Drichoutis, Andreas (2011): Interpreting interaction terms in linear and non-linear models: A cautionary tale.
This is the latest version of this item.
Download (196kB) | Preview
Interaction terms are often misinterpreted in the empirical economics literature by assuming that the coefficient of interest represents unconditional marginal changes. I present the correct way to estimate conditional marginal changes in a series of non-linear models including (ordered) logit/probit regressions, censored and truncated regressions. The linear regression model is used as the benchmark case.
|Item Type:||MPRA Paper|
|Original Title:||Interpreting interaction terms in linear and non-linear models: A cautionary tale|
|Keywords:||interaction terms; ordered probit; ordered logit; truncated regression; censored regression; nonlinear models|
|Subjects:||C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C51 - Model Construction and Estimation
C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C12 - Hypothesis Testing: General
C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C24 - Truncated and Censored Models ; Switching Regression Models ; Threshold Regression Models
C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C25 - Discrete Regression and Qualitative Choice Models ; Discrete Regressors ; Proportions ; Probabilities
|Depositing User:||Andreas Drichoutis|
|Date Deposited:||09. Sep 2011 10:40|
|Last Modified:||31. Dec 2015 14:03|
Ai, C, and EC Norton (2003) Interaction terms in logit and probit models. Economics Letters 80 (1), 123-129.
Brambor, T, WR Clark, and M Golder (2006) Understanding interaction models: Improving empirical analyses Political Analysis 14 (1), 63-82.
Drichoutis, AC, and RM Nayga (2011) Marginal changes in random parameters ordered response models with interaction terms. Econometric Reviews 30 (5), 565-576.
Greene, WH. (2003) Econometric Analysis. 5th ed: New Jersey: Prentice Hall
Greene, WH. (2007) Limdep version 9.0, Econometric modeling guide. Vol. 1. Plainview, New York: Econometric Software Inc.
Greene, WH (2010) Testing hypotheses about interaction terms in nonlinear models. Economics Letters 107 (2), 291-296.
Available Versions of this Item
- Interpreting interaction terms in linear and non-linear models: A cautionary tale. (deposited 09. Sep 2011 10:40) [Currently Displayed]