Re: st: Specification text for continuous Interaction term model over dummy variable model.

[Johan Hellström <johan.hellstrom@pol.umu.se>]

Natasha,

I would say the first model,  the continuous*continuous interaction model,  as in model 2 you throw away a lot of potentially useful information in the data.

Best,
Johan Hellstrom

>Dear All,
>
>I was trying to estimate a model first with continuous interaction
>term and then as a dummy model, and I wanted to know which one would
>be my preferred model. Is there any test to test the same.
>
>Model 1:
>
>xtreg x y z a*b, fe vce(robust)            [a*b=continuous interaction term]
>
>Model 2:
>
>xtreg x y z a*c, fe vce(robust)           [c=1 if b>0.50]
>
>I want to test which is a better model?
>
>Any help will be appreciated.
>
>Thanks,
>Natasha


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