Interpretation sum of coefficients

[Guest]

Dear Stata users,

I have a question regarding the interpretation of my coefficients. I use an IV (TSLS) model to examine the total impact of FDI on income inequallity in Latin America, which is a sum of two coefficients . These are a coefficient including all countries (also Latin American countries) and a Latin American specific coefficient. Of these two coefficients, the global one is insignificant while the Latin American coefficient is significant. I used the command "test _b[FDI all countries] + _b[FDI in Latin America] = 0" to assess whether the sum of the two coefficients is significant. The p-value of this test is >0.10, thus I conclude that the sum (total impact) of FDI is insignificant.

Thus, FDI global (0.021) + FDI Latin America (-0.025***) = -0.004

Since the sum of the coefficients (the total impact of FDI in Latin America) is insignificant, do I have to conclude that FDI has no impact on income inequality in Latin America? Or can I conclude there is some significant relationship between FDI and income inequality in Latin America as the coefficient on specific Latin American countries is significant?

Hoping someone can help me out!

[Phil Bromiley]

You'll increase your chances of a useful answer by following the FAQ on asking questions - provide Stata code in code delimiters, readable Stata output, and sample data using dataex. Knowing exactly what you ran is essential to commenting correctly on your results.

Given my guess about what you ran, your estimates suggest FDI has a .021 influence overall, and a .021 + .025 influence in Latin. Note, there is a big argument over ignoring not statistically significant parameters. While you may not be confident the global parameter is non-zero, it is still the best estimate you can get of the effect. You can be confident the influence in Latin differs from the global influence, but the two together basically cancel out resulting in no overall influence in Latin. Sometimes it is easier to set up the variables separately so you have a variable that is global except for latin (set the latin values to 0) and latin (where non-latin equal 0). Technically, there are going to give you precisely the same results.

[Guest]

Thank you for your reply! I will follow the FAQ on asking questions the next time I will post a question.

Thus, based on your answer I conclude there is no significant impact of FDI on income inequality in Latin America?