Re: st: cascading dummies

[Shikha Sinha <shikha.sinha414@gmail.com>]

Thanks Richard!

very helpful. What is the full reference of STB article, I am unable to find it.

Thanks,
Shikha

On Mon, Oct 1, 2012 at 11:39 AM, Richard Goldstein
<richgold@ix.netcom.com> wrote:
> Hi,
>
> neither is wrong or right -- they answer slightly different questions; A
> asks for each dummy whether, and by how, much it is different from the
> reference group (you do realize that you should only include 4 of the
> dummies, right?); B asks whether each differs from the preceding level
>
> you can -findit cascade- to find a program I wrote to implement
> cascading dummies; the help file, and even more the STB article,
> discusses the differences; note that you can obtain the answer to either
> question by following up the original method of forming the variables
> with the appropriate -test- command(s)
>
> Rich
>
> On 10/1/12 2:31 PM, Shikha Sinha wrote:
>> Hi all,
>>
>> Recently, I came across a new way of creating dummies and I wonder
>> what the group thinks about this form.
>>
>> The independent variable X is coded as 1- very poor, and 5 as very
>> rich. I want to estimate the effect by wealth quintile. I created the
>> dummy the following ways, but I was told that this is wrong (A is
>> wrong). The correct way to construct dummy is B and is called
>> cascading dummies. I have never come across this before and would
>> appreciate if you could shed light on the difference between the two
>> and which is the correct way of creating dummies.
>>
>> A:
>> id    Y       X1 (scale of 1-5),      dum1    dum2    dum3    dum4    dum5
>> 1     100     5       0       0       0       0       1
>> 2     200     4       0       0       0       1       0
>> 3     300     3       0       0       1       0       0
>> 4     239     2       0       1       0       0       0
>> 5     345     1       1       0       0       0       0
>>
>>
>> B:
>> id    Y       X1 (scale of 1-5),      dum1    dum2    dum3    dum4    dum5
>> 1     100     5       1       1       1       1       1
>> 2     200     4       1       1       1       1       0
>> 3     300     3       1       1       1       0       0
>> 4     239     2       1       1       0       0       0
>> 5     345     1       1       0       0       0       0
>>
>> Thanks,
>> Shikha
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