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Dummy-Variable Regression - SAGE Publications Inc

7 dummy -VariableRegressionOne of the serious limitations of multiple- Regression analysis, as presented in Chapters 5and 6, is that it accommodates only quantitative response and explanatory variables. In thischapter and the next, I will explain how qualitative explanatory variables, calledfactors, can beincorporated into a linear current chapter begins with an explanation of how adummy-variable regressorcan becoded to represent adichotomous( , two-category) factor. I proceed to show how a set of dummyregressors can be employed to represent apolytomous(many-category) factor.

124 Chapter 7. Dummy-Variable Regression X Y 0 α α+γ γ 1 β 1 β D = 0 D = 1 Figure 7.4 The additive dummy-regression model coding D =0 for men and D =1 for women (cf., Figure 7.2). and, for D = 1, Yi = (α +γ)+β1Xi1 +···+βkXik +εi A dichotomous factor can be entered into a regression equation by formulating a dummy

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