Multiple Categories(cont) Any categorical variable can be turned into a set of dummy variables o Because the base group is represented b the intercept, if there are n categories there should be n-l dummy variables o If there are a lot of categories, it may make sense to group some together e Example: top 10 ranking, 11-25, etc Economics 20- Prof anderson 6
Economics 20 - Prof. Anderson 6 Multiple Categories (cont) Any categorical variable can be turned into a set of dummy variables Because the base group is represented by the intercept, if there are n categories there should be n – 1 dummy variables If there are a lot of categories, it may make sense to group some together Example: top 10 ranking, 11 – 25, etc
Interactions Among Dummies 2 Interacting dummy variables is like subdividing the e group Example: have dummies for male, as well as hsgrad and colgrad Add male*hsgrad and male colgrad for a total of 5 dummy variables-> 6 categories e Base group is female Hs dropouts O hsgrad is for female HS grads, colgrad is for female college grads o The interactions reflect male HS grads and male college grads Economics 20- Prof anderson 7
Economics 20 - Prof. Anderson 7 Interactions Among Dummies Interacting dummy variables is like subdividing the group Example: have dummies for male, as well as hsgrad and colgrad Add male*hsgrad and male*colgrad, for a total of 5 dummy variables –> 6 categories Base group is female HS dropouts hsgrad is for female HS grads, colgrad is for female college grads The interactions reflect male HS grads and male college grads