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# Re: st: Interaction effects

 From Maarten buis To statalist@hsphsun2.harvard.edu Subject Re: st: Interaction effects Date Mon, 14 Jun 2010 10:38:31 -0700 (PDT)

```--- On Mon, 14/6/10, Lorenzo Ciari wrote:
> I am estimating a probit model and my dependent variable is
> entry (0-1) in a given market. I estimate the model using
> form level data, so for each firm I observe whether it
> enters or not a market (I have multiple markets): I want to
> test whether entry depends on a given variable (call it
> COMP) and see whether the effect of COMP on entry is
> particularly strong for firsm with certain characteristics
> (suppose the characteristics SIZE).
>
> 1)  Question 1: if I want to test the hipothesis that
> COMP has no effect for values of SIZE lower that X, can I
> create a dummy = 1 for firms with size<X and then
> estimate a model with COMP, SIZE (continuous variable) and
> the interaction between (COMP) and the dummy? Can I
> interpret the interaction coefficient as in OLS (I wouldn't
> know how to use AI-Norton inteff command within this
> framework, as I do not interact SIZE with COMP, but the new
> created dummy....

Not really. If you want to interpret the effects in terms of
marginal effects, then you will have to find a way to make
-inteff- work for you. Alternatively, you can switch to a
-logit- model and interpret the exponentiated coefficients,
see: <http://www.maartenbuis.nl/publications/interactions.html>

As I discuss in that paper, both are perfectly legitimate ways
of conceptualizing interaction effects, but they measure subtly
different things.

> 2) Question2: can I, instead, put SIZE in my regression and
> the generate three dummies, one for low values of SIZE, one
> for medium and one for high values. Then I would interact
> COMP with the three dummies and estimate a model with three
> separate coefficients for COMP, that is COMPlow, COMPmedium
> and COMPhigh...

I don't think that this changes much, so once you have solved
follow automatically. (of course you need to decide whether
you want to leave out either a reference category [COMPlow,
or COMPmedium, or COMPhigh] or leave out the main effect
[COMP], as you can't enter all four)

Hope this helps,
Maarten

--------------------------
Maarten L. Buis
Institut fuer Soziologie
Universitaet Tuebingen
Wilhelmstrasse 36
72074 Tuebingen
Germany

http://www.maartenbuis.nl
--------------------------

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