National open university of nigeria introduction to econometrics II eco 356

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Introduction to Econometrics ECO 356 Course Guide and Course Material
Introduction to Econometrics ECO 356 Course Guide and Course Material

2.5.3.2 Change of Reference Category
The skilled workers' schools are considerably less academic than the others, even the technical schools. Suppose that we wish to investigate whether their costs are significantly different from the others. The easiest way to do this is to make them the omitted category (reference category. Then the coefficients of the dummy variables become estimates of the differences between the overhead costs of the other types of school and those of the skilled workers' schools. Since skilled workers' schools are

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