Re: st: cascading dummies

[Richard Goldstein <richgold@ix.netcom.com>]

it is in the help file

On 10/1/12 2:59 PM, Shikha Sinha wrote:
> 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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