st: re: WLS and dummies

[Kit Baum <baum@bc.edu>]

Javier went on to say

Thanks for the answer Kit and all, I tried to use the
command lincom in the following way:

The data set is (a sample):

var1	var2	var3	var4	var5	var6	var7
.576	1	0	0	1	0	0
.354	0	0	1	0	1	0
.542	1	0	0	0	0	1
.6354	0	1	0	1	0	0
.875	1	0	0	0	1	0
.524	0	1	0	0	0	1
.324	0	0	1	0	1	0
.643	1	0	0	1	0	0
.523	0	1	0	0	0	1
.089	0	0	1	0	1	0

and I regress :

reg   var1 var2 var3 var4 var5 var6 var7

and it drops var4 and var7 due multicollinearity. And
I use lincom:

lincom var4

These are not a MEE set of dummies. If they were, there would not be 
more than one dropped due to collinearity. In the obs. leading 0.524, 
there is a 1 in both var3 and var7. So first of all you have to get 
your dummies straightened out.

Re lincom, include all but one of the dummies in a MEE set in a 
regression. Say that you have created dummies from rep78 in auto, so 
there are 5.

reg price rep1-rep4

The constant term is rep5.

forv i=1/4 {
lincom _cons + rep`i'
}

will give you the means of price for each of the other categories.

Kit Baum, Boston College Economics
http://ideas.repec.org/e/pba1.html

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