Marginal and Interaction Effects in Ordered Response Models
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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- Stefan Boes & Rainer Winkelmann, 2005.
"Ordered Response Models,"
SOI - Working Papers
0507, Socioeconomic Institute - University of Zurich.
- 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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