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Nonlinear Relationships. Chapter 7. Prepared by Vera Tabakova, East Carolina University. Chapter 7: Nonlinear Relationships. 7.1 Polynomials 7.2 Dummy Variables 7.3 Applying Dummy Variables 7.4 Interactions Between Continuous Variables 7.5 Log-Linear Models. 7.1 Polynomials.

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nonlinear relationships
Nonlinear Relationships

Chapter 7

Prepared by Vera Tabakova, East Carolina University

chapter 7 nonlinear relationships
Chapter 7: Nonlinear Relationships
    • 7.1 Polynomials
  • 7.2 Dummy Variables
  • 7.3 Applying Dummy Variables
  • 7.4 Interactions Between Continuous Variables
  • 7.5 Log-Linear Models

Principles of Econometrics, 3rd Edition

7 1 polynomials
7.1 Polynomials

7.1.1 Cost and Product Curves

Figure 7.1 (a) Total cost curve and (b) total product curve

Principles of Econometrics, 3rd Edition

7 1 polynomials1
7.1 Polynomials

Figure 7.2 Average and marginal (a) cost curves and (b) product curves

Principles of Econometrics, 3rd Edition

7 1 polynomials2
7.1 Polynomials

Principles of Econometrics, 3rd Edition

7 1 2 a wage equation
7.1.2 A Wage Equation

If Deriv < 0 => Exper < -β3/2β4 ,

or Exper> β3/2β4 .

Principles of Econometrics, 3rd Edition

7 1 2 a wage equation1
7.1.2 A Wage Equation

Principles of Econometrics, 3rd Edition

7 1 2 a wage equation2
7.1.2 A Wage Equation

Where 33.47 is the ‘turning point’

Principles of Econometrics, 3rd Edition

7 2 dummy variables
7.2 Dummy Variables

Principles of Econometrics, 3rd Edition

7 2 1 intercept dummy variables
7.2.1 Intercept Dummy Variables

Principles of Econometrics, 3rd Edition

7 2 1 intercept dummy variables1
7.2.1 Intercept Dummy Variables

Figure 7.3 An intercept dummy variable

Principles of Econometrics, 3rd Edition

7 2 1a choosing the reference group
7.2.1a Choosing The Reference Group

Principles of Econometrics, 3rd Edition

7 2 2 slope dummy variables
7.2.2 Slope Dummy Variables

Principles of Econometrics, 3rd Edition

7 2 2 slope dummy variables1
7.2.2 Slope Dummy Variables

Figure 7.4 (a) A slope dummy variable. (b) A slope and intercept dummy variable

Principles of Econometrics, 3rd Edition

7 2 2 slope dummy variables2
7.2.2 Slope Dummy Variables

Principles of Econometrics, 3rd Edition

7 2 3 an example the university effect on house prices
7.2.3 An Example: The University Effect on House Prices

Principles of Econometrics, 3rd Edition

7 2 3 an example the university effect on house prices1
7.2.3 An Example: The University Effect on House Prices

Principles of Econometrics, 3rd Edition

7 2 3 an example the university effect on house prices2
7.2.3 An Example: The University Effect on House Prices

Principles of Econometrics, 3rd Edition

7 2 3 an example the university effect on house prices3
7.2.3 An Example: The University Effect on House Prices

Principles of Econometrics, 3rd Edition

7 2 3 an example the university effect on house prices4
7.2.3 An Example: The University Effect on House Prices

Based on these regression results, we estimate

  • the location premium, for lots near the university, to be $27,453
  • the price per square foot to be $89.12 for houses near the university, and $76.12 for houses in other areas.
  • that houses depreciate $190.10 per year
  • that a pool increases the value of a home by $4377.20
  • that a fireplace increases the value of a home by $1649.20

Principles of Econometrics, 3rd Edition

7 3 applying dummy variables
7.3 Applying dummy variables
  • 7.3.1 Interactions Between Qualitative Factors

Principles of Econometrics, 3rd Edition

7 3 1 interactions between qualitative factors
7.3.1 Interactions Between Qualitative Factors

Principles of Econometrics, 3rd Edition

7 3 1 interactions between qualitative factors1
7.3.1 Interactions Between Qualitative Factors

Principles of Econometrics, 3rd Edition

7 3 2 qualitative factors with several categories
7.3.2 Qualitative Factors with Several Categories

Principles of Econometrics, 3rd Edition

7 3 2 qualitative factors with several categories1
7.3.2 Qualitative Factors with Several Categories

Principles of Econometrics, 3rd Edition

7 3 3 testing the equivalence of two regressions
7.3.3 Testing the Equivalence of Two Regressions

Principles of Econometrics, 3rd Edition

7 3 3 testing the equivalence of two regressions1
7.3.3 Testing the Equivalence of Two Regressions

Principles of Econometrics, 3rd Edition

7 3 3 testing the equivalence of two regressions2
7.3.3 Testing the Equivalence of Two Regressions

Principles of Econometrics, 3rd Edition

7 3 3 testing the equivalence of two regressions3
7.3.3 Testing the Equivalence of Two Regressions

Principles of Econometrics, 3rd Edition

7 3 4 controlling for time
7.3.4 Controlling for Time

7.3.4a Seasonal Dummies

7.3.4b Annual Dummies

7.3.4c Regime Effects

Principles of Econometrics, 3rd Edition

7 4 interactions between continuous variables
7.4 Interactions Between Continuous Variables

Principles of Econometrics, 3rd Edition

7 4 interactions between continuous variables1
7.4 Interactions Between Continuous Variables

Principles of Econometrics, 3rd Edition

7 4 interactions between continuous variables2
7.4 Interactions Between Continuous Variables

Principles of Econometrics, 3rd Edition

7 4 interactions between continuous variables3
7.4 Interactions Between Continuous Variables

Principles of Econometrics, 3rd Edition

7 5 log linear models
7.5 Log-Linear models

7.5.1 Dummy Variables

Principles of Econometrics, 3rd Edition

7 5 1a a rough calculation
7.5.1a A Rough Calculation

Principles of Econometrics, 3rd Edition

7 5 1b an exact calculation
7.5.1b An Exact Calculation

Principles of Econometrics, 3rd Edition

7 5 2 interaction and quadratic terms
7.5.2 Interaction and Quadratic Terms

Principles of Econometrics, 3rd Edition

7 5 2 interaction and quadratic terms1
7.5.2 Interaction and Quadratic Terms

Principles of Econometrics, 3rd Edition

keywords
Keywords
  • annual dummy variables
  • binary variable
  • Chow test
  • collinearity
  • dichotomous variable
  • dummy variable
  • dummy variable trap
  • exact collinearity
  • hedonic model
  • interaction variable
  • intercept dummy variable
  • log-linear models
  • nonlinear relationship
  • polynomial
  • reference group
  • regional dummy variable
  • seasonal dummy variables
  • slope dummy variable

Principles of Econometrics, 3rd Edition

chapter 7 appendix
Chapter 7 Appendix
  • Appendix 7 Details of log-linear model interpretation

Principles of Econometrics, 3rd Edition

appendix 7 details of log linear model interpretation
Appendix 7 Details of log-linear model interpretation

Principles of Econometrics, 3rd Edition

appendix 7 details of log linear model interpretation1
Appendix 7 Details of log-linear model interpretation

Principles of Econometrics, 3rd Edition

appendix 7 details of log linear model interpretation2
Appendix 7 Details of log-linear model interpretation

Principles of Econometrics, 3rd Edition

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