The New Palgrave Dictionary of Economics

Living Edition
| Editors: Palgrave Macmillan

Dummy Variables

  • Pietro Balestra
Living reference work entry

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DOI: https://doi.org/10.1057/978-1-349-95121-5_541-2

Abstract

The dummy-variable method is a useful device for introducing, into a regression analysis, information contained in qualitative or categorical variables, that is, in variables that are not conventionally measured on a numerical scale, such as race, sex, marital status, occupation, or level of education. It is a means for considering a specific scheme of parameter variation, in which the variability of the coefficients is linked to the causal effect of some precisely identified qualitative variable. But when the qualitative effects are generic, as in the cross-section time-series model, an interpretation in terms of random effects may seem more appealing.

Keywords

Covariance model Cross-section time-series model Dummy variables Engel curve Error component model Qualitative variables Random coefficient model 

JEL Classifications

C1 
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Bibliography

  1. Balestra, P. 1982. Dummy variables in regression analysis. In Advances in economic theory, ed. Mauro Baranzini. Oxford: Blackwell.Google Scholar
  2. Goldberger, A.S. 1960. Econometric theory, 218–227. New York: Wiley.Google Scholar
  3. Maddala, G.S. 1977. Econometrics, chap. 9. New York: McGraw-Hill.Google Scholar
  4. Suits, D.B. 1957. Use of dummy variables in regression equations. Journal of the American Statistical Association 52: 548–551.CrossRefGoogle Scholar

Copyright information

© The Author(s) 2008

Authors and Affiliations

  • Pietro Balestra
    • 1
  1. 1.