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Re: AW: st: prgen option quadratic term


From   Daniel Feenberg <feenberg@nber.org>
To   statalist@hsphsun2.harvard.edu
Subject   Re: AW: st: prgen option quadratic term
Date   Wed, 7 Nov 2012 06:39:32 -0500 (EST)


On Wed, Nov 7, 2012 at 10:35 AM, Meulemann  Max <mmeulemann@ethz.ch> wrote:
thx, the margins and marginsplot function helped a lot.

Anyways anybody got a idea how I am to interpret my data here: I find a negativ linear term for capitagdp, but if i include a quadratic gdp term, that one turns out to be positiv and significant with a lrtest.

If you rerun your regression, but replace gpd*^2 with the square of gdp less mean gdp, then you have basically the same model and standard errors, but the coefficient on the squared term will have no influence on the dependent variable at the mean gdp. So you have an easy interpretation of the linear term - it is the effect at the mean gdp. The sign of the quadratic coeficient then tells you if the effect grows or shrinks for gdp larger or smaller than the mean and it is easy to see how intense that effect will be. The other coeficients will be unaffected.

dan feenberg
NBER
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