The estimation of interaction effects in Probit Models with more than one interaction term

This paper examines the method developed by Norton, Wang and Ai (2004) to compute the interaction effects, and their standard errors, in probit and logit models. It finds that their method is not suitable for probit or logit models that contain multiple interaction terms that include the same variable. The contribution of the paper is that it develops a set of matrix algebra formulas that will estimate the interaction effects in probit models that contain multiple interaction terms that include the same variable. It also develops a set of matrix algebra formulas that will allow the standard errors for the interaction effects to be derived using the Delta method.