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From |
joachim jarreau <joachim.jarreau@gmail.com> |

To |
statalist@hsphsun2.harvard.edu |

Subject |
st: how to include an interaction term with distance in a specification |

Date |
Wed, 18 Nov 2009 13:24:03 +0100 |

Hi, This is a proper econometrics question rather than a stata one. My apologies in advance if this is not the proper place. I am using a panel sample to estimate the impact of a variable x on an outcome y; in my baseline estimate, i find a positive estimate of the elasticity, of about 0.16 (both variables are in log). Now, I would like to test whether the impact of x on y is varying with the distance between them, e.g. with a gap X-Y, or X/Y - X,Y being the variables in level, and X being bigger than Y most of the time. (In short, Id like to test a catching up effect: X and Y both are measures of performance of foreign and domestic firms, respectively - im testing the hypothesis of a spillover effect). I don't know how i should specify this. Should I include the "gap" variable also in the spec., along with the interaction? when i do this, the gap comes out with a big negative coefficient, while the x and the interact coming out with positive coeffs; the resulting estimate of the elasticity is much higher than what i obtained in the linear spec. I think this is just because the LHS variable appears in the gap with a negative sign - on the other hand, if I don't include it, i get a positive coeff on x and a negative on y, but again, the resulting estimate of the elasticity does not match at all with the linear case. I see there's something wrong with this specification, but i don't see how to do this properly. Is there a way? Are there some references on this type of problem? Thanks in advance. Joachim * * For searches and help try: * http://www.stata.com/help.cgi?search * http://www.stata.com/support/statalist/faq * http://www.ats.ucla.edu/stat/stata/

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