This question already has an answer here:
Variables: lprice = log(price of house) ldist = log(distance from incinerator) lintst = log(distance from interstate)
In the 2nd regression I included lintstsq, which is the squared lintst from the 1st regression, and suddenly ldist and lintst become significant and their coefficients change. This doesnt make sense, how come the statistical package couldnt pick up that lintst was significant until I included its squared form, lintstsq? Can someone provide insight into this?
My lecturer's comment on this was:
This makes sense. Being close to the interstate is useful, especially for commuters who use the interstate to get to work. But being too close is not good owing to the noise and pollution. If distance from the incinerator site and distance to the interstate are correlated, we need to get the model specification with respect to the latter right in order to identify the effect of the former.
which doesnt help explain much(or does it?)