Interpreting Dummy Variables in Semi-logarithmic Regression Models: Exact Distributional Results

David Giles

No 1101, Econometrics Working Papers from Department of Economics, University of Victoria

Abstract: Care must be taken when interpreting the coefficients of dummy variables in semi-logarithmic regression models. Existing results in the literature provide the best unbiased estimator of the percentage change in the dependent variable, implied by the coefficient of a dummy variable, and of the variance of this estimator. We extend these results by establishing the exact sampling distribution of an unbiased estimator of the implied percentage change. This distribution is nonnormal, and is positively skewed in small samples. We discuss the construction of bootstrap confidence intervals for the implied percentage change, and illustrate our various results with two applications: one involving a wage equation, and one involving the constructions of an hedonic price index for computer disk drives.

Keywords: Semi-logarithmic regression; dummy variable; percentage change; confidence interval (search for similar items in EconPapers)
JEL-codes: C13 C20 C52 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2011-01-31
New Economics Papers: this item is included in nep-ecm
Note: ISSN 1485-6441
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (32)

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Persistent link: https://EconPapers.repec.org/RePEc:vic:vicewp:1101

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