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Interpreting the outcomes of two-part models

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  • Manuel Frondel
  • Colin James Vance

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.

Suggested Citation

  • Manuel Frondel & Colin James Vance, 2012. "Interpreting the outcomes of two-part models," Applied Economics Letters, Taylor & Francis Journals, vol. 19(10), pages 987-992, July.
    • Handle: RePEc:taf:apeclt:v:19:y:2012:i:10:p:987-992
    DOI: 10.1080/13504851.2011.610733
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    Cited by:

    1. Colin Vance & Nolan Ritter, 2013. "Is Peace a Missing Value or a Zero?," Ruhr Economic Papers 0466, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    2. Yongliang Yang & Liwen Shen & Yuwen Li & Yi Li, 2022. "The Impact of Environmental Information Disclosure on Environmental Governance Satisfaction," Sustainability, MDPI, vol. 14(13), pages 1-21, June.
    3. Frondel, Manuel & Simora, Michael & Sommer, Stephan, 2017. "Risk Perception of Climate Change: Empirical Evidence for Germany," Ecological Economics, Elsevier, vol. 137(C), pages 173-183.
    4. Vance, Colin & Ritter, Nolan, 2013. "Is Peace a Missing Value or a Zero?," Ruhr Economic Papers 466, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    5. Behl, Peter & Dette, Holger & Frondel, Manuel & Tauchmann, Harald, 2013. "Energy substitution: When model selection depends on the focus," Energy Economics, Elsevier, vol. 39(C), pages 233-238.
    6. William A. Darity Jr. & Darrick Hamilton & Samuel L. Myers Jr. & Gregory N. Price & Man Xu, 2022. "Racial Differences in Time at Work Not Working," ILR Review, Cornell University, ILR School, vol. 75(3), pages 552-572, May.

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