Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/129079 
Year of Publication: 
2012
Citation: 
[Journal:] Applied Economics Letters [ISSN:] 1466-4291 [Volume:] 19 [Issue:] 10 [Publisher:] Taylor & Francis [Place:] Abingdon [Year:] 2012 [Pages:] 987-992
Publisher: 
Taylor & Francis, Abingdon
Abstract: 
Interaction effects capture the impact of one explanatory variable x 1 on the marginal effect of another explanatory variable x 2. To explore interaction effects, the so-called interaction terms x 1 x 2 are typically included in estimation specifications. While in linear models the effect of a marginal change in the interaction term is equal to the interaction effect, this equality generally does not hold in nonlinear specifications (Ai and Norton, 2003). This article provides for a general derivation of marginal and interaction effects in both linear and nonlinear models and calculates the formulae of the marginal and interaction effects resulting from the Two-Part Model (2PM), a commonly employed censored regression model. Drawing on a survey of automobile use from Germany, we illustrate several subtleties inherent to the substantive interpretation of interaction effects gleaned from nonlinear models, such as the 2PM.
Subjects: 
censored regression model
interaction terms
marginal and interaction effects
Published Version’s DOI: 
Document Type: 
Article
Document Version: 
Accepted Manuscript (Postprint)

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