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Econometrics for Daily Lives, Volume II by Tam Bang Vu

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CHAPTER 8

Nonlinearity and Limited Dependent Variables

Invo tells the class that he is estimating a model of investment in plots of land scattered throughout the suburban areas of the city. He is wondering whether we could learn more about the interaction of a dummy variable, such as a certain neighborhood containing a lot, with a continuous variable, such as the land size. Prof. Metric says that this represents a nonlinear relation that will be discussed in this chapter, and once we finish with it, we will be able to:

1. Analyze cases when slope dummy variables interact with other dummy variables.

2. Discuss other nonlinear models limited dependent variables in regressions.

3. Explain how to apply the linear regression techniques into nonlinear ...

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