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Questions › DSE › DSE 2018 › Q39
4 marks, −1Econometrics › Dummy variables and functional forms › Interaction terms and piecewise regressionsModerateabout 2 min

DSE 2018 Question 39: Dummy variables and functional forms

Suppose you have run the regression y=α+βx+γ Urban+θ Immigrant+δ Urban×Immigrant+ϵy = \alpha + \beta x + \gamma\,\mathrm{Urban} + \theta\,\mathrm{Immigrant} + \delta\,\mathrm{Urban}\times\mathrm{Immigrant} + \epsilony=α+βx+γUrban+θImmigrant+δUrban×Immigrant+ϵ, where Urban indicates living in a city and Immigrant indicates being an immigrant. The coefficient θ\thetaθ is interpreted as the ceteris paribus difference in yyy between

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Suppose you have run the regression y = α + β x + γ Urban + θ Immigrant + δ Urban×Immigrant + ϵ, where Urban indicates living in a city and Immigrant indicates being an immigrant. The coefficient θ is interpreted as the ceteris paribus difference in y between (A) A rural immigrant and a rural native (B) None of the above (C) An immigrant and a native (D) An urban immigrant and an urban native

Also written as: Suppose you have run the regression y = alpha + beta x + gamma Urban + theta Immigrant + delta Urban*Immigrant + epsilon, where Urban indicates living in a city and Immigrant indicates being an immigrant. The coefficient theta is interpreted as the ceteris paribus difference in y between

Dummy variables and functional forms has come up 20 times in 6 exams since 2011.

What this question tests

This question is on Interaction terms and piecewise regressions, part of Dummy variables and functional forms in Econometrics.

Letting slopes differ across groups or ranges.

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