<p>I'm a little unsure of what &quot;pt&quot; means, but I assume that &quot;pt&quot; is the independent variable of interest.</p>
<p>In the regression with the interaction term, the coefficient for &quot;pt&quot; is &quot;the expected value of the dependent variable for undeveloped countries if all other independent variables are 0&quot;.</p>
<p>The coefficient for the interaction term is &quot;the average difference in the outcome variable for developed countries compared to undeveloped countries, holding fixed all other independent variables&quot;.</p>

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2021-07-13T11:29:48.743Z
2021-07-13T11:29:48.743Z
Michael Gmeiner
<p>From <a href="https://economics.stackexchange.com/a/45684/33142">this discussion</a>, one way of conducting the subsample test is
changing the equation from</p>
<p>Dependent_variables= pt + Independent_variables + fixed effects  + error term</p>
<p>to</p>
<p>Dependent_variables= pt  + <strong>developed_dummy * pt</strong> + Independent_variables + fixed effects  + error term</p>
<p>while <strong>developed_dummy</strong> equal to <strong>1</strong> if the firm in developed countries and <strong>0</strong> otherwise
I am wondering whether it is the case?</p>
<p>And if it is the case, how come we explain the meaning of the coefficient of <strong>developed_dummy*pt</strong> ?</p>

<econometrics>
Asking for subsample test approaches
Phil Nguyen
# Asking for subsample test approaches

(Asked by: username_0 on 2021-07-12)

From [this discussion](https://economics.stackexchange.com/a/45684/33142), one way of conducting the subsample test is
changing the equation from

Dependent\_variables= pt + Independent\_variables + fixed effects + error term

to

Dependent\_variables= pt + **developed\_dummy \* pt** + Independent\_variables + fixed effects + error term

while **developed\_dummy** equal to **1** if the firm in developed countries and **0** otherwise
I am wondering whether it is the case?

And if it is the case, how come we explain the meaning of the coefficient of **developed\_dummy\*pt** ?

**Tags:** econometrics

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## 1 answers

### Answer by username_1 on 2021-07-13. Score: 1 | Accepted answer

I'm a little unsure of what "pt" means, but I assume that "pt" is the independent variable of interest.

In the regression with the interaction term, the coefficient for "pt" is "the expected value of the dependent variable for undeveloped countries if all other independent variables are 0".

The coefficient for the interaction term is "the average difference in the outcome variable for developed countries compared to undeveloped countries, holding fixed all other independent variables".


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