Econometrics 1123: Section 4 Handout

Eunice Hanehan@fas.harvard.edu

September 30th, 2010

1. The interaction between Independent Variables

To allow the effect of X1i on Yi to depend on X2i, we can include the interaction term X1i* X2i as a regressor.

Q1. Show that depends on X1= Q2. Plot the regression line of Y and X2, when X1 = a and X1 = b, where a