Kit,
Thank you very much for your reply. I have interacted the X term with
the institutional factor Z. Given the nature of the dependence, I was
thinking of interacting Z with something like (Xbar - X(i)).
Thanks,
Suryadipta.
On 11/22/07, Kit Baum <[email protected]> wrote:
> 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
> http://ideas.repec.org/e/pba1.html
> An Introduction to Modern Econometrics Using Stata:
> http://www.stata-press.com/books/imeus.html
>
>
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