Interaction Terms in a Hausman-Taylor Model

[Nik Jangid]

Hi,

I am using the Hausman-Taylor estimator in Stata 14.0. I need to use an interaction term to understand how the performance of respondents from different groups varies over time. When I ran xthtaylor, I got an error - "interactions not allowed". Is there a way to use an interaction term with 'xthtaylor' in Stata?

Thanks,
N

[Carlo Lazzaro]

Nik:
welcome to this forum.
You should create interaction by hand.

[Carole J. Wilson]

It looks like xthtaylor allows the old -xi:- expansion operator (see help xi).

*So, instead of
xthtaylor ... i.factorvar1##c.continuous_var ... i.factor_var2##i.factor_var3

*use
xi: xthtaylor ... i.factor_var1*continuous_var...i.factor_var2*i.factor_var3

But know that if you used the expansion operator for a variable in one part of the equation, you need to do the same in the others:

This will give you an error:

xi: xthtaylor lwage wks i.south*ed smsa ms exp exp2 occ ind i.union*i.fem blk, endog(exp exp2 occ ind union ed) constant(fem blk ed)

This will work:

xi: xthtaylor lwage wks i.south*ed smsa ms exp exp2 occ ind i.union*i.fem blk, endog(exp exp2 occ ind i.union ed) constant(i.fem blk ed)

[Nik Jangid]

Thank you, Carlo!

Thanks, Carole J. Wilson! I have worked it out and have the results now.