I am running a multiple regression model. Here is my question. I want to create a dummy variable for the following categorical variable
I have 4 categories for education. One is school, high school, college and university
I know the usual way would be to create three dummies with one reference group. However here is my question.
- Can I just create ONE dummy variable called university and say my reference is people who do not have university education and run the regression like this?
- My second question is an extension on the first question. Can I create just TWO dummy variables out of these 4 variables. Say just college and university. Why or why not?
I am really having a hard time understanding these things, so would love to know about these things in detail.