How does the interpretation of the coefficient on the income to debt ratio change in the linear probability model of whether a mortgage applicant was approved for a loan or not if the outcome variable was Denied_i instead of Approved_i? A) It won't change. B) The coefficients will be the same, but the standard errors will change. C) One will be a model of causality, the other will be purely about correlation. D) One coefficient will be the change in probability of being denied, while the other will be the change in probability of being approved.

Question

Quizplus · Accepted Answer

The interpretation of the coefficient on the income to debt ratio will change in the linear probability model if the outcome variable was Denied_i instead of Approved_i. In the new model, the coefficient on income to debt ratio will represent the change in probability of being denied a loan instead of being approved.

How Does the Interpretation of the Coefficient on the Income