An executive researcher wants to better understand the factors that explain differences in salaries for marketing majors. He decides to estimate two models: y = β0 + β1d1 +
(Model 1) and y = β0 + β1d1 + β2d2 +
(Model 2). Here y represents salary, d1 is a dummy variable that equals 1 for male employees, and d2 is a dummy variable that equals 1 for employees with an MBA.
a. What is the reference group in Model 1?
b. What is the reference group in Model 2?
c. In the above models, would it matter if d1 equaled 1 for female employees?