ABSTRACT
Up to now, the dependent variables in the economic models we discussed were all measurement variables. But what if the dependent variable we are interested in is categorical in nature? For example, we may be interested in investigating the main determinants of home ownership in an urban setting. Alternatively, our interest may be to find out why some rural labourers succeed in obtaining permanent jobs while others have to depend on temporary work or casual jobs. In both examples the dependent variables are categorical in nature. In fact, they are both dichotomous variables. This chapter looks at dependent categorical variables which are dichotomous in nature and, hence, can be represented by dummy variables. Our focus, therefore, is on regressions in which the dependent variable is a dummy variable.
