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Interactions Between Independent Variables (SW Section 8.3)
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(a) Interactions of two binary vars
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Interpreting the coefficients
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(b) Interactions of continuous and binary variables
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Binary-continuous interactions: the two regression lines
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Example: TestScore, STR, and HiEL (=1 if PctEL > 10)
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Testing Hypotheses about Interaction Effects
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(c) Interactions of continuous vars
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Example: TestScore, STR, PctEL
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Testing Hypotheses about Interaction Effects
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Application: Nonlinear Effects on Test Scores of the Student-Teacher Ratio (SW Section 8.4)
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1. Are there different effects for different STR levels?
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2. Are there interactions between PctEL and STR?
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What is a good “base” specification?
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Tests of joint hypotheses:
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Interpreting the regression functions via plots:
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Comparing the regressions with interactions:
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Application: Berg Dale & Krueger (QJE, 2002)
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Application: Berg Dale & Krueger (QJE, 2002)
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Application: Berg Dale & Krueger (QJE, 2002)
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Application: Berg Dale & Krueger (QJE, 2002)