Interpreting interaction terms in linear and non-linear models: A cautionary tale
Andreas Drichoutis ()
MPRA Paper from University Library of Munich, Germany
Interaction terms are often misinterpreted in the empirical economics literature by assuming that the coefficient of interest represents unconditional marginal changes. I present the correct way to estimate conditional marginal changes in a series of non-linear models including (ordered) logit/probit regressions, censored and truncated regressions. The linear regression model is used as the benchmark case.
Keywords: interaction terms; ordered probit; ordered logit; truncated regression; censored regression; nonlinear models (search for similar items in EconPapers)
JEL-codes: C51 C12 C24 C25 (search for similar items in EconPapers)
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