Chapter 9

Regression with Dummy Explanatory Variables

In This Chapter

arrow Converting qualitative information into quantitative data

arrow Estimating differences in means between two groups with regression analysis

arrow Performing regression analysis using qualitative and quantitative data simultaneously

arrow Testing for joint significance

Quantitative variables such as years of experience, costs, and prices aren’t the only variables that can have a major influence on the dependent variable in a regression model. Qualitative variables — think gender, race, season of the year, and geographical location — can too. In this chapter, I explain how qualitative variables can be used as independent (or explanatory) variables just as readily as quantitative variables in traditional ordinary least squares (OLS) regression. I also show you all the common ways in which qualitative variables are used in econometric analysis and help you figure out how to interpret the coefficient estimates.

Numbers Please! Quantifying Qualitative Information

Estimating an econometric model requires that all the information be quantified. ...

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