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

[natasha agarwal <agarwana2@googlemail.com>]

Thanks John,

But is there a statistical test to formally test the same?

Thanks,
Natasha

2012/1/19 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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