A variable that takes on the values of 0 or 1 and is used to incorporate the effect of qualitative variables in a regression model is called a dummy variable.

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A dummy variable, also known as an indicator variable, is indeed used in regression models to represent qualitative variables by taking on the values of 0 or 1, allowing for the inclusion of categorical data in a regression model.

A Variable That Takes on the Values of 0 or 1