Econometrics - Dummy Variables - Ch. 6 Gujarati - 2020

This video is based on Chapter 6 of D.N. Gujarati & Porter’s : Essentials of Econometrics. The Topic discussed is the introduction of Dummy Variables in Regression and its analysis. I have discussed the following issues:

1. Types of Variables in Regression: Continuous Vs Categorical, the need for the latter and the incorporation of it in Regression Modeling.

2. Different types of Models with Dummy variables :

a. ANOVA Models: Models based on only Categorical Variables ( Hardly used in Economics)

b. ANCOVA Models : Models with both Dummy Variables and Continuous Variables

3. Regression with More than One Dummy Variables where a Dummy Variables can take 3-4 options : Always include m-1 dummies for variable that has m categories. This is to avoid Dummy Variable Trap.

4. Interaction effect of Dummies

5. Comparing Regression Lines: CHOW Test : Concept of Interaction between Dummy Variable and Continuous Variable : How we can have 4 types of cases:

a. Coincidental regression: Non Significant Differential Intercept & Non Significant Differential Slope Coefficient (Slope Drift)

b. Parallel Regression: Significant Differential Intercept but Non Significant Differential Slope Coefficient

c. Concurrent Regression: Non Significant Differential Intercept but Significant Differential Slope Coefficient

d. Dis-Similar Regression: Significant Differential Intercept & Significant Differential Slope Coefficient

This Chapter is extremely important from the point of examination for Semester IV students of Economics Hons. & BBE of Delhi University. While students of Masters, MBA, UGC-NET, IES Exam would also find it useful in their course of preparation.

My Best Wishes & Happy Learning😊

The Pink Professor
Siddharth Rathore
Assistant Professor
Department of Economics
Gargi College
University of Delhi