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Bayesian Unconditional Quantile Regression. An Analysis of Recent Expansions in Wage Structure and Earnings Inequality in the U.S. 1992-2009

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  • Michel Lubrano

    ()
    (CNRS, Greqam)

  • Abdoul Aziz Junior Ndoye

    ()

Abstract

We develop a reliable Bayesian inference for the RIF-regression model of Firpo, Fortin and Lemieux (Econometrica, 2009) in which we first estimate the log wage distribution by a mixture of normal densities. This approach is pursued so as to provide better estimates in the upper tail of the wage distribution as well as valid confidence intervals for the Oaxaca-Blinder decomposition. We apply our method to a Mincer equation for analysing the recent changes in the U.S. wage structure and in earnings inequality. Our analysis uses data from the CPS Outgoing Rotation Group (ORG) from 1992 to 2009. We find first that the largest part (around 77% on average) of the recent changes in the U.S. wage inequality is explained by the wage structure effect and second that the earnings inequality is rising more at the top end of the wage distribution, even in the most recent years. The decline in the unionisation rate has a small impact on total wage inequality while differences in returns to education and gender discrimination are the dominant factors accounting for these recent changes.

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Bibliographic Info

Paper provided by Aix-Marseille School of Economics, Marseille, France in its series AMSE Working Papers with number 1203.

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Length: 28 pages
Date of creation: Jan 2012
Date of revision:
Handle: RePEc:aim:wpaimx:1203

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Web page: http://www.amse-aixmarseille.fr/en
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Keywords: Oaxaca-Blinder decomposition; Bayesian inference; quantile regression; unconditional quantile; influence function.;

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  1. José A. F. Machado & José Mata, 2001. "Earning functions in Portugal 1982-1994: Evidence from quantile regressions," Empirical Economics, Springer, vol. 26(1), pages 115-134.
  2. Sergio Firpo & Nicole M. Fortin & Thomas Lemieux, 2009. "Unconditional Quantile Regressions," Econometrica, Econometric Society, vol. 77(3), pages 953-973, 05.
  3. Juhn, Chinhui & Murphy, Kevin M & Pierce, Brooks, 1993. "Wage Inequality and the Rise in Returns to Skill," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 410-42, June.
  4. DiNardo, John & Fortin, Nicole M & Lemieux, Thomas, 1996. "Labor Market Institutions and the Distribution of Wages, 1973-1992: A Semiparametric Approach," Econometrica, Econometric Society, vol. 64(5), pages 1001-44, September.
  5. Atkinson, A B, 2008. "The Changing Distribution of Earnings in OECD Countries," OUP Catalogue, Oxford University Press, number 9780199532438.
  6. Katz, Lawrence F & Murphy, Kevin M, 1992. "Changes in Relative Wages, 1963-1987: Supply and Demand Factors," The Quarterly Journal of Economics, MIT Press, vol. 107(1), pages 35-78, February.
  7. Bazen, Stephen, 2011. "Econometric Methods for Labour Economics," OUP Catalogue, Oxford University Press, number 9780199576791.
  8. Ben Jann, 2008. "A Stata implementation of the Blinder-Oaxaca decomposition," ETH Zurich Sociology Working Papers 5, ETH Zurich, Chair of Sociology, revised 14 May 2008.
  9. Melly, Blaise, 2005. "Decomposition of differences in distribution using quantile regression," Labour Economics, Elsevier, vol. 12(4), pages 577-590, August.
  10. Radchenko, Stanislav I. & Yun, Myeong-Su, 2003. "A Bayesian approach to decomposing wage differentials," Economics Letters, Elsevier, vol. 78(3), pages 431-436, March.
  11. Bound, John & Johnson, George, 1992. "Changes in the Structure of Wages in the 1980's: An Evaluation of Alternative Explanations," American Economic Review, American Economic Association, vol. 82(3), pages 371-92, June.
  12. Alan S. Blinder, 1973. "Wage Discrimination: Reduced Form and Structural Estimates," Journal of Human Resources, University of Wisconsin Press, vol. 8(4), pages 436-455.
  13. Yu, Keming & Moyeed, Rana A., 2001. "Bayesian quantile regression," Statistics & Probability Letters, Elsevier, vol. 54(4), pages 437-447, October.
  14. Koenker, Roger W & Bassett, Gilbert, Jr, 1978. "Regression Quantiles," Econometrica, Econometric Society, vol. 46(1), pages 33-50, January.
  15. Murphy, Kevin M & Welch, Finis, 1992. "The Structure of Wages," The Quarterly Journal of Economics, MIT Press, vol. 107(1), pages 285-326, February.
  16. Buchinsky, Moshe, 1994. "Changes in the U.S. Wage Structure 1963-1987: Application of Quantile Regression," Econometrica, Econometric Society, vol. 62(2), pages 405-58, March.
  17. Rosen, Sherwin, 1981. "The Economics of Superstars," American Economic Review, American Economic Association, vol. 71(5), pages 845-58, December.
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