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From |
Christopher Baum <kit.baum@bc.edu> |

To |
"statalist@hsphsun2.harvard.edu" <statalist@hsphsun2.harvard.edu> |

Subject |
re: Re: st: Interaction terms |

Date |
Tue, 3 May 2011 13:11:54 -0400 |

<> 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)? Obviously not the same model. If you wanted to fully interact the G1/G2 split with the model regress y ov edu wealth ovxedu ovxwealth it would be regress y i.G2##(ov edu wealth ovxedu ovxwealth) (1) If you then did regress y ov edu wealth ovxedu ovxwealth if G1 (2) you would get the same point estimates in (1) for the G1 countries as you do in (2), but the standard errors would differ. In the pooled regression (1) you are constraining the sigma^2 to be equal across G1 and G2, whereas in (2) and the equivalent model you could run for group G2 that constraint is not applied. Note that the fully interacted model needs G2 by itself as well as interacted. Your model above with the "xG2" variables does not do that. Kit Kit Baum | Boston College Economics & DIW Berlin | http://ideas.repec.org/e/pba1.html An Introduction to Stata Programming | http://www.stata-press.com/books/isp.html An Introduction to Modern Econometrics Using Stata | http://www.stata-press.com/books/imeus.html * * 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/

**Follow-Ups**:**Re: Re: st: Interaction terms***From:*lreine ycenna <lreine.ycenna@gmail.com>

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