Don’t Sleep on the Interaction Term

The majority of the traffic to this blog comes from the United States, but there’s a fair amount from other countries, pretty widely distributed.

globaltraffic

I figured you could predict the traffic (excluding the United States) fairly well from the number of English speakers and the GDP per capita of the country, but a simple regression on these two variables doesn’t do a very good job:

traffic3

On the other hand, if you include an interaction term (ie, you’re regressing on GDP per capita, the number of English speakers in the country, and GDP times number of English speakers), it does a much better job, explaining about 75 percent of the variation (the United States ends up being more-or-less right on the line, but it’s so far above everything else in both predicted and actual score that the graph becomes totally unreadable if you include it):

traffic4

Interaction terms– they explain a lot.

5 thoughts on “Don’t Sleep on the Interaction Term

  1. Try plotting with log-log axes. Also, did you calculate “percent variance explained’ on relative or absolute variance? If the latter, the few biggest points might dominate the estimate.

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    1. The actual direct effects not being significant but the interaction is actually is a good clue that you should be using logs.

      E.g. if you have something like:

      y = 0*GDP + 0*E + 1*(GDP*E)

      it suggests that

      y = ?*log(GDP) + ?*log(E)

      might be a better fit in many situations, since log(GDP*E) = log(GDP) + log(E).

      (Unless you have some real substantive *apriori* reason why the first model is correct. It is weird in most situations though to have a higher order interaction, but not a direct effect.)

      Liked by 1 person

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