1 Interactions Between Independent Variables (SW Section 8.3)

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Presentation transcript:

1 Interactions Between Independent Variables (SW Section 8.3)

2 (a) Interactions of two binary vars

3 Interpreting the coefficients

4 Example

5 (b) Interactions of continuous and binary variables

6 Binary-continuous interactions: the two regression lines

7 Example: TestScore, STR, and HiEL (=1 if PctEL > 10)

8 Testing Hypotheses about Interaction Effects

9 (c) Interactions of continuous vars

10 Example: TestScore, STR, PctEL

11 Testing Hypotheses about Interaction Effects

12 Application: Nonlinear Effects on Test Scores of the Student-Teacher Ratio (SW Section 8.4)

13 1. Are there different effects for different STR levels?

14 2. Are there interactions between PctEL and STR?

15 What is a good “base” specification?

16

17 Tests of joint hypotheses:

18 Interpreting the regression functions via plots:

19 Comparing the regressions with interactions:

20 Application: Berg Dale & Krueger (QJE, 2002)

21 Application: Berg Dale & Krueger (QJE, 2002)

22 Application: Berg Dale & Krueger (QJE, 2002)

23 Application: Berg Dale & Krueger (QJE, 2002)