For the model y = β₀+ β₁x + β₂d + β₃xd + ε, in which d is a dummy variable, we can perform standard t tests for the individual significance of x, d, and xd.

Question

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Since the model includes all variables of interest (x, d, and xd) and the use of a dummy variable allows for the estimation of different intercepts between the two groups, it is possible to perform standard t tests for the individual significance of each variable.

For the Model Y = β0 + β1x + β2d

For the Model Y = β₀+ β₁x + β₂d