dear all,
I have built a fixed effect model to test the buffering effect of religiosity in mitigating the effect of bad health on life satisfaction (dependent variable).
- The coefficient for health measures the change in life satisfaction in relation to a change in health
- The coefficient for religiosity measures the change in life satisfaction in relation to a change in religiosity
In addition I have an interaction term between the two.
If I found, for example, a positive coefficient for the interaction term, what does this mean? How can I interpet it?
Thank you in advance!
Francesco Molteni
Whenever we interact two qualitative dummy variables, it adds to the intercept.
However, if we interact a qualitative and a quantitative variable, it becomes a part of the slope.
Interpretation: Whenever you move to your chosen qualitative variable from your reference variable, then your dependent variable changes by the coefficient amount.
For eg: If your dummy variable is female(F) and qualitative variable is wages(W) and the independent variable is health expenditure(H).
Your regression model will look like this-
H=a+bW+cF+dWF
So when wages of females increases by 1unit, health expenditure increases by d units, ceteris paribus.
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