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Marginal and Interaction Effects in Ordered Response Models

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  • Debdulal Mallick

Abstract

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.

Suggested Citation

  • Debdulal Mallick, 2009. "Marginal and Interaction Effects in Ordered Response Models," EERI Research Paper Series EERI_RP_2009_22, Economics and Econometrics Research Institute (EERI), Brussels.
    • Handle: RePEc:eei:rpaper:eeri_rp_2009_22
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    File URL: http://www.eeri.eu/documents/wp/EERI_RP_2009_22.pdf
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    References listed on IDEAS

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    1. Spanos,Aris, 1999. "Probability Theory and Statistical Inference," Cambridge Books, Cambridge University Press, number 9780521424080.
    2. Stefan Boes & Rainer Winkelmann, 2006. "Ordered Response Models," Springer Books, in: Olaf Hübler & Jachim Frohn (ed.), Modern Econometric Analysis, chapter 12, pages 167-181, Springer.
    3. 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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    Cited by:

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    More about this item

    Keywords

    Marginal effect; interaction effect; ordered probit; discrete choice.;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities

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