Let’s assume that we want to measure the effect of education…
Let’s assume that we want to measure the effect of education, job training, and job types on wage as follows: Wage variable: a wage. Education variable: the number of years for education. Train variable: a binary job training variable (1: training experience 0: no training experience). Job variable: contains six possible answers (worker, technical, service, office, sales, management). We assumed that the base group for the job variable is worker (i.e., 0) and convert the job variable as multiple binary dummy variables as follows: Technical variable (1: job type is technical, otherwise 0) Service variable (1: job type is service, otherwise 0) Office variable (1: job type is office, otherwise 0) Sale variable (1: job type is sale, otherwise 0) Management variable (1: job type is management, otherwise 0)
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