Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/129079
Authors: 
Frondel, Manuel
Vance, Colin
Year of Publication: 
2012
Citation: 
[Journal:] Applied Economics Letters [ISSN:] 1350-4851 (Print) [ISSN:] 1466-4291 (Online) [Volume:] 19 [Issue:] 10 [Pages:] 987-992
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
Persistent Identifier of the first edition: 
Document Type: 
Article

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