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Shapley-Value Decompositions of Changes in Wage Distributions: A Note

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  • Francesco Devicienti

Abstract

This note shows how the Shapley-value can be applied to the regression-based methods that are often used to decompose changes in wage distributions. The method remedies the path-dependency exhibited by existing approaches that compute the contributions due to (i) changes in sample observable characteristics, (ii) changes in the return of characteristics, (iii) changes in the distribution of unobservable characteristics.

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Paper provided by LABORatorio R. Revelli, Centre for Employment Studies in its series LABORatorio R. Revelli Working Papers Series with number 80.

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Date of creation: 2008
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Handle: RePEc:cca:wplabo:80

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Keywords: regression-based decomposition methods; wage distribution; Shapley-value.;

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  1. Jonathan Morduch & Terry Sicular, 1998. "Rethinking Inequality Decomposition, with Evidence from Rural China," Harvard Institute of Economic Research Working Papers, Harvard - Institute of Economic Research 1831, Harvard - Institute of Economic Research.
  2. José Mata & José A. F. Machado, 2005. "Counterfactual decomposition of changes in wage distributions using quantile regression," Journal of Applied Econometrics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 20(4), pages 445-465.
  3. Nidardo, J. & Fortin, N. & Lemieux, T., 1994. "Labor Market Institutions and the Distribution of Wages, 1973-1992: A Semiparametric Approach," Papers, California Irvine - School of Social Sciences 93-94-15, California Irvine - School of Social Sciences.
  4. Borgarello Andrea & Devicienti Francesco, 2006. "L'aumento della disuguaglianza dei salari in Italia: premi salariali per le "nuove" skill?," Politica economica, Società editrice il Mulino, Società editrice il Mulino, issue 2, pages 193-232.
  5. Mercedes Sastre & Alain Trannoy, 2002. "Shapley inequality decomposition by factor components: Some methodological issues," Journal of Economics, Springer, Springer, vol. 9(1), pages 51-89, December.
  6. Oaxaca, Ronald, 1973. "Male-Female Wage Differentials in Urban Labor Markets," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 14(3), pages 693-709, October.
  7. Bourguignon, Francois & Fournier, M & Gurgand, M, 2001. "Fast Development with a Stable Income Distribution: Taiwan, 1979-94," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 47(2), pages 139-63, June.
  8. Wan, Guanghua, 2004. "Accounting for income inequality in rural China: a regression-based approach," Journal of Comparative Economics, Elsevier, vol. 32(2), pages 348-363, June.
  9. Stephane Mussard & Virginie Terraza, 2008. "The Shapley decomposition for portfolio risk," Applied Economics Letters, Taylor & Francis Journals, Taylor & Francis Journals, vol. 15(9), pages 713-715.
  10. Thomas Lemieux, 2002. "Decomposing changes in wage distributions: a unified approach," Canadian Journal of Economics, Canadian Economics Association, Canadian Economics Association, vol. 35(4), pages 646-688, November.
  11. 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, University of Chicago Press, vol. 101(3), pages 410-42, June.
  12. Shorrocks, A F, 1982. "Inequality Decomposition by Factor Components," Econometrica, Econometric Society, Econometric Society, vol. 50(1), pages 193-211, January.
  13. Shorrocks, Anthony F, 1983. "The Impact of Income Components on the Distribution of Family Incomes," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 98(2), pages 311-26, May.
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Cited by:
  1. Arthur Charpentier & Stéphane Mussard, 2011. "Income inequality games," Journal of Economic Inequality, Springer, Springer, vol. 9(4), pages 529-554, December.
  2. Daniel Baumgarten, 2010. "Exporters and the Rise in Wage Inequality – Evidence from German Linked Employer-Employee Data," Ruhr Economic Papers, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen 0217, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  3. Deutsch, Joseph & Fusco, Alessio & Silber, Jacques, 2013. "The BIP Trilogy (bipolarization, inequality and polarization): One saga but three different stories," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy, vol. 7(22), pages 1-33.
  4. Masato Okamoto, 2011. "Source decomposition of changes in income inequality: the integral-based approach and its approximation by the chained Shapley-value approach," Journal of Economic Inequality, Springer, Springer, vol. 9(2), pages 145-181, June.
  5. Fabián Slonimczyk, 2013. "Earnings inequality and skill mismatch in the U.S.: 1973–2002," Journal of Economic Inequality, Springer, Springer, vol. 11(2), pages 163-194, June.
  6. Rosalba Manna & Andrea Regoli, 2012. "Regression-based approaches for the decomposition of income inequality in Italy, 1998-2008," Rivista di statistica ufficiale, ISTAT - Italian National Institute of Statistics - (Rome, ITALY), vol. 14(1), pages 5-18, October.
  7. Paolo Verme & Branko Milanovic & Sherine Al-Shawarby & Sahar El Tawila & May Gadallah & Enas Ali A. El-Majeed, 2014. "Inside Inequality in the Arab Republic of Egypt : Facts and Perceptions across People, Time, and Space," World Bank Publications, The World Bank, number 17583, August.
  8. HILDEBRAND Vincent & PI ALPERIN Maria Noel & VAN KERM Philippe, 2012. "Measuring and accounting for the deprivation gap of Portuguese immigrants in Luxembourg," CEPS/INSTEAD Working Paper Series 2012-33, CEPS/INSTEAD.
  9. Gunatilaka, Ramani, 2013. "To work or not to work? : Factors holding women back from market work in Sri Lanka," ILO Working Papers, International Labour Organization 483840, International Labour Organization.

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