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# Re: st: Interaction terms

 From lreine ycenna To statalist@hsphsun2.harvard.edu Subject Re: st: Interaction terms Date Tue, 3 May 2011 17:23:58 +0100

```Thank you all.

I have another question relating to my previous question.

I have two dummies for country groups G1 and G2.

In the stata command, I could (1) interact the term so it becomes:

regress y ov edu wealth eduxG2 wealthxG2 ovxeduxG2 ovxwealthxG2

or (2) I could run: regress y ov edu wealth ovxedu ovxwealth if G1 ==1.

Would the 2nd method be wrong? What's the difference between (1) and (2)?

lreine

On 3 May 2011 14:05, lreine ycenna <lreine.ycenna@gmail.com> wrote:
> Hi,
>
> (1) I'm running a regression, wanting to see the effect of overseas living
> experience (OV) on one's income (y) which is also determined by eudcation
> level (edu) and wealth.
>
> regress y ov edu wealth ovxedu ovxwealth.
>
> I also want to see the effect of overseas experience on y with a mixed
> variable:  edu and wealth.
>
> If I run regress y ov edu wealth eduxwealth ovxedu ovxwealth ovxeduxwealth,
> I might run into collinearity problems when I include more variables in the
> future.
>
> or can I run a separate regression such as regress y ov wealthxedu
> ovxwealthxedu? Which one is correct?
>
>
> (2) when I run regress y ov edu wealth eduxwealth ovxedu ovxwealth
> ovxeduxwealth, OV has a negative coefficient,
>
>  but it changes to positive when I run regress y ov wealthxedu
> ovxwealthxedu. What does this suppose to mean?
>
> (3) I have very large standard errors (ranged from 0-14) when running
> both equations. Does this mean that the results are very 'imprecise'?
>
> lreine
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```