One form of data reduction is cluster analysis which is used to separate detailed data into constituent groups. This paper illustrates a useful application of cluster analysis to the data reduction of detailed discrete responses of a type that are often found in large surveys. This method is illustrated using the ABS Training and Education Experience Survey 1993 (TEES). This survey provides a detailed range of information on individuals' computer skills. The information given in the survey is simplified by using a form of cluster analysis to combine categories of computer ability and skills. Wage equations are estimated using different assumptions on the degree of clustering. Copyright 2001 by Taylor and Francis Group
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