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Re: st: Model specification


From   "joe J." <otharain@hotmail.com>
To   statalist@hsphsun2.harvard.edu
Subject   Re: st: Model specification
Date   Tue, 11 May 2004 13:59:43 +0000

Many thanks Daniel for your good comments.

Daniel Feenberg <feenberg@nber.org> wrote:


You will have trouble taking the log of zero, but even assuming you change
the dummy to be 1/2 instead of 0/1 it is unhelpfull to log the value. This
would be equivalent to have a dummy variable of log(1) or log(2), which
will cause the estimated coefficient on that variable to be different, but
won't change any t-statistic or coefficient on any other variable.

The time trend without logs estimates a constant percentage change in the
underlying dependent variable per time period. If you logged time, then
you would be estimating a relationship in which instead of a constant
growth rate, there was a growth rate constant in the log of time, which
seems pretty odd. After all, it would depend on when "time started".

the basic model. My question is should these two variables be also used in
log-form or not?

Thanks for any pointers.
Joe

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