# Econ-T4 eng.pdf - Econometrics Introducing qualitative...

• 11

Course Hero uses AI to attempt to automatically extract content from documents to surface to you and others so you can study better, e.g., in search results, to enrich docs, and more. This preview shows page 1 - 6 out of 11 pages.

EconometricsIntroducing qualitative factors in RMDr. Toni Mora
Including dummy variables¡Nominal variables (levels of education). Alsocalledcategoricalvariables(¹numberofcategories)lDichotomous or binary variables (two values)lPolytomous independent variables (more than twocategories)Useful for changes in time, specific observations, outliers ordifferentiating RM based on groups of individuals
Dichotomous variables¡Those variables only having two values, that is intheformofbinaryinformation.Usually,thesevalues are substituted by 0 & 1 to obtain an easierinterpretation of OLS results¡In Catalan also calledvariables fictícies¡We can introduce these dummy variables additivelyor by means of interaction terms
AdditivelyiiiiDXyebbb+++=2,110iiadditiveiiiXXyebbbebbb+++=+++=,11202,110)(!"!#\$Introduced dummyExample: Di=0 if the firm does notexport & Di=1 if the firm exportsiiiXyebb++=,110
Relationship with the rest ofthe exogenous variables¡Theuseofthedichotomousvariablesisnotequivalent to disentangle from the sample in twoparts and estimating both models¡Therestofcoefficientsdifferbasedontheestimated RM (Analysis of covariance-ANCOVA)

Course Hero member to access this document

Course Hero member to access this document

End of preview. Want to read all 11 pages?

Course Hero member to access this document

Term
Fall
Professor
Lolo
Tags