Use of Dummy Variables in Regression Equations

Abstract

Abstract The use of dummy variables requires the imposition of additional constraints on the parameters of regression equations if determinate estimates are to be obtained. Among the possible constraints the most useful are (a) to set the constant term of the equation to zero, or (b) to omit one of the dummy variables from the equation. In working with a single system of classes either constraint can be used, and results from the application of one are readily derived from those obtained from the other. If several systems of classes are involved the best procedure is to delete one dummy variable from each system.