Tests of Inference for Dummy Variables in Regressions with Logarithmic Transformed Dependent Variables
AbstractThe interpretation of dummy variables in regressions where the dependent variable is subject to a log transformation has been of continuing interest in economics. However, in the main, these earlier papers do not deal with the inferential aspects of the parameters estimated. In this paper we compare the inference implied by the hypotheses tested on the linear parameter estimated in the model and the tests applied to the proportional change that this parameter implies. An important element in this analysis is the asymmetry introduced by the log transformation. Suggestions are made for the appropriate test procedure in this case. Examples are presented from some common econometric applications of this model in the estimation of hedonic price models and wage equations.
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Bibliographic InfoPaper provided by The University of Melbourne in its series Department of Economics - Working Papers Series with number 852.
Length: 17 pages
Date of creation: 2002
Date of revision:
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Hypothesis tests; lognormal distribution; measures of proportional change; wage equation; hedonic price model;
Find related papers by JEL classification:
- C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
- C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
- R15 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Econometric and Input-Output Models; Other Methods
- J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
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