Hi there,
I would like to estimate the following equation:
Y = b0+ b1*X1 +b2* X2 + b3*X1*X2
X1 is a dummy variable and endogenous, X2 is exogenous and normalized.
If there are no interaction term, I can apply either IV or Heckman two stage to correct the endogeneity of X1.
However with the interaction term of X1*X2, I do not know how to deal with it.
Any advice is much appreciated!
Gordon
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