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My job is to create a dummy variable so that those who voted for the Labour Party are compared to a single reference group that includes all other voters.

1 = Conservative, 2 = Labour, 3 = Liberal Democrat, 4 = SNP, 5 = Plaid Cymru, 6 = Green Party, 7 = UKIP, 8 = BNP, 9 = Other

In this situation, would the reference group include {1, 3, 4, 5, 6, 7, 8, 9}

So, the dummy variable would be:

  • {2} -- > 1 (is Labour)

  • {1, 3, 4, 5, 6, 7, 8, 9} -- > 0 (is not Labour)

Have I taken the right approach here? I am slightly confused because the reference group in this situation is included in the dummy variable. Usually, the reference group is not included because it is already assumed in the model.

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1 Answer 1

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That looks correct. You would then want to include your dummy variable in a regression with a constant. Alternatively, you could create 2 dummy variables:

  • DLabor=1 if group=2, else DLabor=0
  • DOther=1 if group not equal to 2, else DOther=0

and then include the 2 dummy variables (DLabor and DOther) in a regression without a constant.

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