We propose a shrinkage method for estimation in linear regression models with qualitative regressors. Due to the nature of the shrinkage constraint, this method tends to give estimates that are exactly zero for some groups of coefficients belonging to the same regressor. The method hence results in concise models, since some of the regressors are entirely eliminated. In conjunction with this estimation method, a model with a fixed cluster effect turns out to be closely related to frailty models. We apply the method for modelling hospital readmissions.
Copyright 2004 John Wiley & Sons, Ltd.