re: st: STATA drops squared terms from the model

[David Airey <david.airey@Vanderbilt.Edu>]

.

Does centering before making the polynomial terms help?

-Dave


> Dear Statalist, I estimate a log-log model with interaction term of  
> the following form: lnY = b0 + b1lnX + b2lnZ + b3lnX*lnZ + e I want  
> to test whether X and Z have a nonlinear effect on Y. Therefore, I  
> add squared terms of X and Z to the model. When I estimate this  
> model STATA drops X and Z from the model due to multicollinearity.  
> The correlation coefficients between the unsquared and squared terms  
> are very high (> 0,96). I have some problems interpreting this  
> result. Does this mean that there is no non-linear effect? Best  
> regards Phil
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