st: Chow test as a solution for testing of equality of coefficients across two separate samples.

[natasha agarwal <agarwana2@googlemail.com>]

Dear Everyone,

I wanted to test the equality of a coefficient across two different
groups namely developed and developing.

I read the proposed solutions provided in the archives plus the FAQs
which is mainly introducing an interaction term.

However my question is that when I introduce an interaction term in a
regression, a significant slope on the interaction term will indicate
that the difference between the two groups is significantly different
from zero.

But does it indicate the actual coefficient on the interacted group
and also indicate whether the same is significantly different from
zero?

So for example when I estimate

xtreg lnrval lnk lnw lnvfdi lnvfdi*D y14-y18, fe vce(robust)

where D=1 if developed and zero otherwise.

a significant coefficient on lnvfdi*D will tell me the difference in
the impact of FDI when the country is developed.

But can one conclude that coeffcient on lnvfdi minus coefficient on
lnvfdi*D is the actual impact of FDI when country is developed?

Can anyone please help me with this?

Thanks
Natasha
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