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Re: st: interpreting cofficient on interaction of two logged variables


From   Maarten Buis <maartenlbuis@gmail.com>
To   statalist@hsphsun2.harvard.edu
Subject   Re: st: interpreting cofficient on interaction of two logged variables
Date   Tue, 21 Aug 2012 15:01:59 +0200

On Tue, Aug 21, 2012 at 2:40 PM, D'Souza, Anna - ERS wrote:
> Question 1: Does anyone have a reference that describes the interaction of logged variables? I am looking for a justification as to why to use "log x1 * log x2" vs. log (x1 * x2).

Remember that : log(a) + log(b) = log(a*b), so a model like:

log(y) = a*log(x1) + b*log(x2) + c*log(x1*x2)

can be rewritten as

log(y) = a*log(x1) + b*log(x2) + c*log(x1) + c*log(x2)

which is probably not what you want.

Hope this helps,
Maarten

---------------------------------
Maarten L. Buis
WZB
Reichpietschufer 50
10785 Berlin
Germany

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