My dependent variable is house prices. And my interaction term contains two continuous variables 1) log of employment at the nearest firm 2) log of distance to the nearest firm.
House price = b0 + b1 lemployment + b2 lnrdistance +
-0.0014 (lemployment*lnrdistance)
I am confused on how to interpret this interaction coefficient and what it means for the relationship between employment/distance and price. Any help is greatly appreciated.
I have seen previous posts about similar topics, but I still cannot solve my problem
Best Answer
The way to interpret the coefficient is to think of cross partial derivatives.
So, to answer your question, you can think of the marginal effect of employment on house price as depending on distance. The effect of log of employment on nearest firm on houseprice depends negatively on distance. So for a given increase in log of employment in the nearest firm, the effect depends negatively on distance- ie. the effect will be lesser if the closest firm is farther away.