The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Dummy Variables

  • Pietro Balestra
Reference work entry


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.


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

JEL Classifications

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  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

© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Pietro Balestra
    • 1
  1. 1.