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re: st: STATA drops squared terms from the model

From   David Airey <david.airey@Vanderbilt.Edu>
To   Statalist <>
Subject   re: st: STATA drops squared terms from the model
Date   Mon, 13 Jul 2009 12:53:57 -0500


Does centering before making the polynomial terms help?


Dear Statalist, I estimate a log-log model with interaction term of the following form: lnY = b0 + b1lnX + b2lnZ + b3lnX*lnZ + e I want to test whether X and Z have a nonlinear effect on Y. Therefore, I add squared terms of X and Z to the model. When I estimate this model STATA drops X and Z from the model due to multicollinearity. The correlation coefficients between the unsquared and squared terms are very high (> 0,96). I have some problems interpreting this result. Does this mean that there is no non-linear effect? Best regards Phil

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