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re: st: Adjust after regression involving categorical variables


From   Kit Baum <[email protected]>
To   [email protected]
Subject   re: st: Adjust after regression involving categorical variables
Date   Wed, 28 Oct 2009 10:37:55 -0400

<>
Maarten suggested

This is a case where you can meaningfully use "effect coding".
This is a way of coding the categorical variable dummies so
that they measure the effect relative to the overal mean
rather than relative to the reference catogories. If you set
the resulting dummies at zero you will get the adjusted prices
for an average car. Effect coding is implemented in the -xi3-
package by Michael Mitchell and Phil Ender. You can find it
by typing in Stata -findit xi3-.

*---------------- begin example -----------------
sysuse auto, clear
xi3: regress price weight turn e.rep i.foreign

adjust weight turn ///
       _Irep78_2=0 ///
       _Irep78_3=0 ///
       _Irep78_4=0 ///
       _Irep78_5=0 ///
      , by(foreign)
*--------------- end example --------------------


Or much more easily as

regress price weight turn i.rep78 i.foreign
margins i.foreign, asbal


Predictive margins Number of obs = 69
Model VCE    : OLS

Expression   : Linear prediction, predict()
at           : rep78            (asbalanced)
               foreign          (asbalanced)

------------------------------------------------------------------------------
             |            Delta-method
| Margin Std. Err. z P>|z| [95% Conf. Interval] ------------- +----------------------------------------------------------------
     foreign |
0 | 5077.14 453.2891 11.20 0.000 4188.71 5965.57 1 | 8316.978 726.8291 11.44 0.000 6892.419 9741.537
------------------------------------------------------------------------------


Kit Baum   |   Boston College Economics & DIW Berlin   |   http://ideas.repec.org/e/pba1.html
An Introduction to Stata Programming | http://www.stata-press.com/books/isp.html
   An Introduction to Modern Econometrics Using Stata  |   http://www.stata-press.com/books/imeus.html

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