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st: Interacting dummies and multicollinearity issue

From   "Özlen D. Luznar" <>
Subject   st: Interacting dummies and multicollinearity issue
Date   Wed, 23 Jun 2010 07:50:40 -0400 (EDT)

Hi everyone,

I am using a recursive biprobit model.  I have 2 separate categorical

variable d - has 3 values - dummied out to d1 d2 d3
variable e has 4 values dummied out to e1 e2 e3 e4

In addition to include d1 d2 e1 e2 e3 in my model I want to include
interaction terms between d dummies and e dummies:

12 possible variables interaction between d dummies and e dummies.  Among
these 12 I know that at least 3 dummies have only one value and that is 0,
in other words d2*e2 == 0 for everyone, d3*e1 == 0 for everyone and
d2*e1==0 for everyone.

I am confused as to which of these 12 I can/should include in the model so
as to avoide multicollinearity.

This may be a basic question but I appreciate any help you may give me.



Özlen D. Luznar

PhD Candidate - Public Policy
Graduate Research Assistant
University of Maryland Baltimore County (UMBC)
1000 Hilltop Circle
Baltimore, MD 21250


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