I am investigating the effect of Indian service imports on U.S. service employment, using a balanced panel data set. The employment data are state-level for 5 different business service sectors. In this research the dependent variable is U.S. business service employment. The independent variables are: Indian service imports, Skill intensity within business service sectors(measured in average years of education), Real GDP and an interaction variable IMPORT*Skill. The purpose of this interaction variable is to measure whether the effect of Indian business services is larger in sectors that are more skill intensive. Logs are used to ease the interpretation of results. Furthermore, not all variables were found to be stationary, which is why the first difference is taken of each variable. A dummy for each year has been used to add a time effect.
The results show that there is no significant relationship between Indian service Imports and U.S. business service employment and that there is a significant positive relationship between Skill and business service employment. Furthermore, the interaction variable is found to be significantly negatively related with employment.
The regression I used is: xtreg DIFvalue DIFimp DIFskill DIFgdp DIFimpXskill dummy1 dummy2 dummy3 dummy4 dummy5 dummy6 dummy7 dummy8 dummy9 dummy10 dummy11 dummy12 dummy13 dummy14 dummy15 dummy16, fe vce (cluster cn_ind)
The output is as following:
R-sq: Obs per group: within = 0.2501 min = 14 between = 0.5817 avg = 14.0 overall = 0.2011 max = 14 F(15,249) = . corr(u_i, Xb) = 0.0045 Prob > F = . (Std. Err. adjusted for 250 clusters in cn_ind) DIFvalue Coef. Std. Err. t P>t [95% Conf. Interval] DIFimp .045624 .0393354 1.16 0.247 -.0318485 .1230965 DIFskill 8.36e-10 3.32e-10 2.51 0.013 1.81e-10 1.49e-09 DIFgdp -.0016054 .0273678 -0.06 0.953 -.0555073 .0522965 DIFimpXskill -.0003645 .0001315 -2.77 0.006 -.0006236 -.0001055
My question is, How do I interpret the interaction variable? Indian imports(DIFimp) are not significantly related with U.S. employment(DIFvalue) and Skill(DIFskill) is positively related with U.S. employment. The interaction variable is negatively related with employment. So does this still mean that as the skill within a sector is higher, that the effect of Indian imports on employment is lower? Or is this impossible as the effect of Indian imports on employment is insignificant?
Could anyone help me with this interpretation?