Data reduction of discrete responses: an application of cluster analysis

One form of data reduction is cluster analysis which is used to separate de tailed data into constituent groups. This paper illustrates a useful applic ation of cluster analysis to the data reduction of detailed discrete respon ses of a type that are often found in large surveys. This method is illustr ated using the ABS Training and Education Experience Survey 1993a (TEES). T his survey provides a detailed range of information on individuals' compute r 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 c lustering.