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st: RE: Your opinion on income groups and inflation


From   "Martin Weiss" <martin.weiss@uni-tuebingen.de>
To   <statalist@hsphsun2.harvard.edu>
Subject   st: RE: Your opinion on income groups and inflation
Date   Sat, 7 Jun 2008 19:23:29 +0200

The obsession with dummies in some posts is a little bewildering. If you
already have an ordered variable recording trust in government it is hard to
see why you would want to throw away this information and let the resulting
dummies eat up your df. Just include the variable in the regression as it
is. If you absolutely want to, -tabulate, generate- could be helpful. Be
sure to omit one dummy in the regression to dodge the famous dummy trap...

Martin Weiss
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Diplom-Kaufmann Martin Weiss
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-----Original Message-----
From: owner-statalist@hsphsun2.harvard.edu
[mailto:owner-statalist@hsphsun2.harvard.edu] On Behalf Of Andrea Bennett
Sent: Saturday, June 07, 2008 7:19 PM
To: statalist@hsphsun2.harvard.edu
Subject: st: Your opinion on income groups and inflation

Dear Statalisters,

I wonder what you do think about the following issues:

1.
I have a cross-sectional panel data set with a time span of 10 years  
(5 complete surveys). The survey does NOT ask for (more or less)  
precise income but instead for income groups (e.g. between 3000 and  
4000 $). As this does cluster the income quite a bit I was wondering  
of how much use it would be to control for the inflation rate (which  
was rather low, about 1-2% p.a.)? Still, I tend to control for  
inflation since there is a gradual shift from lower income groups to  
higher income groups. Would you include the inflation adjustments or  
not?

2.
Do I need to treat these income groups as categorical data and  
therefore generate dummies for each income category? Do I also need to  
control for the highest income group with an additional dummy since it  
measures income>=10'000$? This just affects the df quite a bit, I  
think. How would you deal with such a variable?

3.
Related to the above question, I wonder how one usually deals with  
interval variables. I have a variable measuring the trust/confidence  
in the national government on a scale of 0-10 (1-point steps). Again,  
as I have learned it, I would have to include a dummy for each trust- 
level. Again, losing df is what brings me to ask you again. Do I need  
to generate dummies here or not?


Kind regards and many thanks for your consideration,

Andrea


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