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st: re: general econometrics question

From   Kit Baum <>
Subject   st: re: general econometrics question
Date   Thu, 22 Nov 2007 16:05:41 -0500

Suryadipta said

the effect of the most important explanatory variable on the
dependent variable is subject to whether countries are widely
different in terms of their institutions. For countries that are
similar in their institutional structure, this explanatory variable is
not important in explaining (changes in) the dependent variable. Can
anyone suggest/point me towards proper econometric tests in this case?

If the effect of X depends on institutiional factor Z, then you should be using an interaction of X and Z (as well as a main effect of Z) because you want dY/dX to differ according to a country's level of Z.

Kit Baum, Boston College Economics and DIW Berlin
An Introduction to Modern Econometrics Using Stata:

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