Hi Everyone --
This is more of a stats question that a STATA question --- nonetheless, I hope that you will allow me to pick your brains. I am working on a regression analysis, where the key set of covariates are a series of dummy variables. The most theoretically logical category to omit for the hypotheses we are trying to test is also the smallest. To get handle on the data, the group sizes are shown below:
group 1 = 69
group 2 = 3,636
group 3 = 553
group 4 = 894
Group 1 is the key group that we wish to use as the omitted category and include dummy variables for groups 2 through 4. Does anyone know if there are estimation problems when you use a small reference category? Is this approach legitimate? Does anyone know any citations that I could use as a guide for this?
As always --- Much Thanks!
Robert
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