Multiple Regression Applications III. Lecture 18. Dummy variables. Include qualitative indicators into the regression: e.g. gender, race, regime shifts. So far, have only seen the change in the intercept for the regression line.
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Wi = a + b1Agei + b2Marriedi + b3Di + b4(Di*Agei) + b5(Di*Marriedi) + ei
Wi = a + b1Agei + b2Marriedi + e
H0 : aM, b1M, b2M = aF, b1F, b2F
q = k, the number of parameters in the model
n = n1 + n2 where n is complete sample size
SSRU = SSRM + SSRF
Irene O. Wong:
Wt = a + b1Agei + b2Marriedi + b3Di + b4(Di*Agei) + b5(Di*Marriedi) + ei
E(Wt|Di = 0) = a + b1Agei + b2Marriedi
E(Wt|Di = 1) = (a + b3) + (b1 + b4)Agei + (b2 + b3)Marriedi
H0 : b1 = b3 = 0