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Marginal and Interaction Effects in Ordered Response Models

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  • Debdulal Mallick

Abstract

In discrete choice models the marginal effect of a variable of interest that is interacted with another variable differs from the marginal effect of a variable that is not interacted with any variable. The magnitude of the interaction effect is also not equal to the marginal effect of the interaction term. I present consistent estimators of both marginal and interaction effects in ordered response models. This procedure is general and can easily be extended to other discrete choice models. I also provide an example using household survey data on food security in Bangladesh. Results show that marginal effects of interaction terms are estimated by standard statistical software (STATA® 10) with very large error and even with wrong sign.

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Bibliographic Info

Paper provided by Economics and Econometrics Research Institute (EERI), Brussels in its series EERI Research Paper Series with number EERI_RP_2009_22.

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Length: 10 pages
Date of creation: 09 2009
Date of revision:
Handle: RePEc:eei:rpaper:eeri_rp_2009_22

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Keywords: Marginal effect; interaction effect; ordered probit; discrete choice.;

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  1. Spanos,Aris, 1999. "Probability Theory and Statistical Inference," Cambridge Books, Cambridge University Press, number 9780521424080, December.
  2. Stefan Boes & Rainer Winkelmann, 2005. "Ordered Response Models," SOI - Working Papers 0507, Socioeconomic Institute - University of Zurich.
  3. Ai, Chunrong & Norton, Edward C., 2003. "Interaction terms in logit and probit models," Economics Letters, Elsevier, vol. 80(1), pages 123-129, July.
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Cited by:
  1. Debdulal Mallick & Mohammad Rafi, 2008. "Are the Female Headed Households More Food Insecure? Evidence from Bangladesh," Economics Series 2008_08, Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance.
  2. Jing Lan & Alistair Munro, 2012. "Environmental Compliance and Human Capital: Evidence from Chinese Industrial Firms," GRIPS Discussion Papers 12-05, National Graduate Institute for Policy Studies.

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