Multiplicative interaction terms are widely used in economics to identify heterogeneous effects and to tailor policy recommendations. The execution of these models is often flawed due to specification and interpretation errors. This article introduces regression trees and regression tree ensembles to model and visualize interaction effects. Tree-based methods include interactions by construction and in a nonlinear manner. Visualizing nonlinear interaction effects in a way that can be easily read overcomes common interpretation errors. We apply the proposed approach to two different datasets to illustrate its usefulness.

Using regression tree ensembles to model interaction effects: a graphical approach

Masci, Chiara;Agasisti, Tommaso;
2018

Abstract

Multiplicative interaction terms are widely used in economics to identify heterogeneous effects and to tailor policy recommendations. The execution of these models is often flawed due to specification and interpretation errors. This article introduces regression trees and regression tree ensembles to model and visualize interaction effects. Tree-based methods include interactions by construction and in a nonlinear manner. Visualizing nonlinear interaction effects in a way that can be easily read overcomes common interpretation errors. We apply the proposed approach to two different datasets to illustrate its usefulness.
education economics; heterogeneous effects; interaction effects; machine learning; Regression trees; Economics and Econometrics
File in questo prodotto:
File Dimensione Formato  
11311-1077128 Agasisti.pdf

accesso aperto

: Publisher’s version
Dimensione 1.89 MB
Formato Adobe PDF
1.89 MB Adobe PDF Visualizza/Apri

I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.

Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11311/1077128
Citazioni
  • ???jsp.display-item.citation.pmc??? ND
  • Scopus 8
  • ???jsp.display-item.citation.isi??? 8
social impact