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This is a fixed effect panel model in Stata. Income group has 4 categories: Low income, Lower middle income, Upper middle income and High income. Here below, I put the interaction coefficient values for the model. I would like to know the effect of financial service (findex) on Carbon emissions. Other control variables are: per capita gdp, consumption expenditure, renewable energy and trade amount.

How will I interpret the coefficient value from the interaction?

Co2pc                |      Coef.   Std. Err.      t    P>|t|     [95% Conf. Interval]
Low income           |  -.0165589   .0194985    -0.85   0.396    -.0548202    .0217024
Lower middle income  |    .010723   .0103074     1.04   0.298    -.0095029    .0309488
Upper middle income  |    .042023   .0081153     5.18   0.000     .0260985    .0579475

I tried this code:

xtreg Co2pc findex GDPpc Cons_exp Energy Trade i.incomegroup##c. findex,fe
kjetil b halvorsen
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Arpi
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  • See this page for interpreting an interaction between a continuous predictor and a 4-level categorical predictor. The coefficient for findex itself is the slope when incomegroup is at its reference level, "High income" here. The interaction coefficients are differences from that slope for each of the other levels of incomegroup. – EdM May 20 '23 at 14:01

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