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st: Interaction terms in fixed effects analysis |

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Sat, 7 Feb 2009 23:44:27 -0500 |

Hi, I'm using panel data to analyze the effect of educational expenditure per student on test scores across 100 Indian districts over two years. Now, these 100 districts belong to three different states. To capture the different effect of expenditure on test scores across the three states, I used the *xi* command to interact *perstudent* and *state*, with state as the group variable. I'm using both OLS and Fixed Effects regression (the OLS regression table is below). However, I'm not quite sure how to interpret the regression coefficients. I have three specific questions: 1. In OLS, is the effect of expenditure in State 2 on *testscore* 11.16 units more than State 1? Or is it 11.16 - 0.0068 (-0.0068 is the coefficient on the interaction between state 2 and expenditure) 2. In Fixed Effects, _Istate_2 and _Istate_3 were dropped. _IstaXpers~2 and _IstaXpers~3 were not. How would one interpret the coefficients on IstaXpers~2 and _IstaXpers~3 in the Fixed Effects model? 3. Does the coefficient on *perstudent* indicate that increasing expenditure across *all three states* is decreasing testscores by 0.0025 units? Or does *perstudent* refer to a specific state? Thank you. I really appreciate your taking the time to help. Regards, Tara Iyer . xi: reg testscore i.state*perstudent i.state _Istate_1-3 (naturally coded; _Istate_1 omitted) i.state*perst~t _IstaXperst_# (coded as above) Source | SS df MS Number of obs = 230 -------------+------------------------------ F( 5, 224) = 22.51 Model | 15291.7444 5 3058.34888 Prob > F = 0.0000 Residual | 30436.1777 224 135.875793 R-squared = 0.3344 -------------+------------------------------ Adj R-squared = 0.3196 Total | 45727.9221 229 199.685249 Root MSE = 11.657 ------------------------------------------------------------------------------ ner | Coef. Std. Err. t P>|t| [95% Conf. Interval] -------------+---------------------------------------------------------------- _Istate_2 | 11.15724 7.264148 1.54 0.126 -3.157571 25.47205 _Istate_3 | 10.23105 6.075904 1.68 0.094 -1.742197 22.20429 perstudent | -.0024748 .0013051 -1.90 0.059 -.0050468 .0000971 _IstaXpers~2 | -.0067742 .0022988 -2.95 0.004 -.0113042 -.0022441 _IstaXpers~3 | -.0020089 .0016681 -1.20 0.230 -.0052961 .0012783 _cons | 97.34217 2.719425 35.80 0.000 91.98324 102.7011 * * 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: st: Interaction terms in fixed effects analysis***From:*"Kyle K. Hood" <[email protected]>

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