Suppose that you want to examine whether income elasticity of consumption is different for males...

Gerald Ritter

Gerald Ritter

Answered

2022-01-30

Suppose that you want to examine whether income elasticity of consumption is different for males and females while controlling for age, education level and marital status of respondents. In the model, you should include:
Quadratics of log(income)
None of them
An interaction term of income with a dummy variable representing gender status
An interaction term of log(income) with age.
An interaction term of log(income) with a dummy variable representing gender status

Answer & Explanation

euromillionsna

euromillionsna

Expert

2022-01-31Added 16 answers

Step 1
Given situation is that income elasticity of consumption is different for males and females while controlling for age, education level and marital status.
Step 2
The correct option is c. An interaction term of income with dummy variable representing gender status.
Because, the gender variables include two categories male and female. So, this category convert into 1 and 0 format which called as dummy variable technique. A dummy variable is a numerical representation of the categories of a nominal or ordinal variable. Hence, there is interaction term of income with dummy variable representing gender status.

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