Question

To include education in a regression model where education is defined as: did not graduate high school, high school graduate, some college, undergraduate degree, at least one graduate degree, the number of dummy variables required is

Answer 1

The regression  equation of the above model can be given as

Y= a +bx₁+cx₂+dx₃+ ex₄

where

did not graduate high school = a

high school graduate = b

some college = c

undergraduate degree = d

at least one graduate degree= e

and x₁, x₂, x₃, x₄  are the dummy variables

In the given question the number of categories is 5 and the number of dummy variables is 4.

What a dummy variable is?

A dummy variable is the variable that indicates the change in effect by taking values 0 or1 in the presence or absence of some other categories.

Solution:

A dummy variable is always 1 less than the given number of original variables.

In the given question the number of categories is 5 and the number of dummy variables is 4.

For example the dummy variable for the

1) male and female groups is 1

2) 12 colors is 11

3) 3 meals is 2

4) 7 days is 6 and so on.

To more understanding  of dummy variables click

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