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From |
Ben John <bjworld88@googlemail.com> |

To |
statalist@hsphsun2.harvard.edu |

Subject |
st: Re: missing dummy variable |

Date |
Thu, 4 Oct 2007 19:55:16 +0100 |

Thank you very much: Maarten and Rich How can I apply your suggestion to xtregar? Thank you! Ben Note that if you want the R-squared (e.g.) values to be comparable between the two models you should use the hascons option rather than the nocons option -- see the manual also, another option is to have all dummies and the constant by constraining the coefficients of the set of dummies to sum to 0 Rich I am first going to explain that both models contain exactly the same information, before I am going to tell you how to add all dummies. Say we want to know how foreign and domestic cars differ with respect to mpg. We can do that in two ways: We can do a regression of mpg on a dummy which is 1 for foreign and 0 for domestic cars. The equation than looks like this: mpg = b0 + b1 * foreign The expected mpg for foreign cars is than: E(mpg|foreign) = b0 + b1 * 1 = b0 + b1 The expected mpg for domestic cars is than: E(mpg|foreign) = b0 + b1 * 0 = b0 So the constant tells you the expected mpg for domestic cars and b1 tells you how much foreign cars differ from domestic cars. An alternative would be to add a dummie for foreign cars and a dummie for domestic cars: mpg = b1 * foreign + b2 * domestic The expected mpg for foreign cars is than: E(mpg|foreign) = b1 * 1 + b2 * 0 = b1 The expected mpg for domestic cars is than: E(mpg|foreign) = b1 * 0 + b2 * 1 = b2 So now b1 and b2 tell you the expected value of respectively foreign and domestic cars. The two model contain exactly the same information: Say that the mean mpg for domestic cars is 20 and is 5 more for foreign cars is exactly the same as saying that the mean mpg is 20 for domestic cars and 25 for foreign cars. You may have noticed that in the second model (both dummies) I did not have a constant in the equation, this is delibarate. If you want to enter all dummies you have to exclude the constant. The way to do that is to add the -noconst- option in Stata, see the example below: *------------------ begin example --------------- sysuse auto, clear gen domestic = !foreign reg mpg foreign reg mpg foreign domestic, noconst *------------------- end example ---------------- (For more on how to use examples I sent to the Statalist, see http://home.fsw.vu.nl/m.buis/stata/exampleFAQ.html ) Hope this helps, Maarten > I wonder whether there is a solution to avoid missing the first dummy > variable in stata programm? I need all of the dummy variables in the > equations. > > Many thanks in advance. > Ben > * * For searches and help try: * http://www.stata.com/support/faqs/res/findit.html * http://www.stata.com/support/statalist/faq * http://www.ats.ucla.edu/stat/stata/

**Follow-Ups**:**Re: st: Re: missing dummy variable***From:*Maarten buis <maartenbuis@yahoo.co.uk>

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