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A Stata implementation of the Blinder-Oaxaca decomposition

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  • Ben Jann

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Abstract

The counterfactual decomposition technique popularized by Blinder (1973) and Oaxaca (1973) is widely used to study mean outcome differences between groups. For example, the technique is often used to analyze wage gaps by sex or race. The present paper summarizes the technique and addresses a number of complications such as the identification of effects of categorical predictors in the detailed decomposition or the estimation of standard errors. A new Stata command called -oaxaca- is introduced and examples illustrating its usage are given.

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File URL: http://repec.ethz.ch/ets/papers/jann_oaxaca.pdf
File Function: Revised version, 2008
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Bibliographic Info

Paper provided by ETH Zurich, Chair of Sociology in its series ETH Zurich Sociology Working Papers with number 5.

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Length: 25 pages
Date of creation: 05 May 2008
Date of revision: 14 May 2008
Handle: RePEc:ets:wpaper:5

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Web page: http://www.socio.ethz.ch/

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Keywords: Stata; Blinder-Oaxaca decomposition; outcome differential; wage gap;

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  1. Ugidos Olazabal, Arantza & Gardeazabal, Javier, 2002. "More on Identification on Detailed Wage Decompositions," DFAEII Working Papers 2002-17, University of the Basque Country - Department of Foundations of Economic Analysis II.
  2. Keshab Shrestha & Chris Sakellariou, 1996. "Wage discrimination: a statistical test," Applied Economics Letters, Taylor & Francis Journals, vol. 3(10), pages 649-651.
  3. Jacques Silber & Michal Weber, 1999. "Labour market discrimination: are there significant differences between the various decomposition procedures?," Applied Economics, Taylor & Francis Journals, vol. 31(3), pages 359-365.
  4. repec:ebl:ecbull:v:3:y:2007:i:66:p:1-7 is not listed on IDEAS
  5. F. L. Jones, 1983. "On Decomposing the Wage Gap: A Critical Comment on Blinder's Method," Journal of Human Resources, University of Wisconsin Press, vol. 18(1), pages 126-130.
  6. Doris Weichselbaumer & Rudolf Winter-Ebmer, 2005. "A Meta-Analysis of the International Gender Wage Gap," Journal of Economic Surveys, Wiley Blackwell, vol. 19(3), pages 479-511, 07.
  7. John P. Haisken-DeNew & Christoph M. Schmidt, . "Inter-Industry and Inter-Region Differentials: Mechanics and Interpretation," Working Papers 9504, SELAPO Center for Human Resources.
  8. John Hendrickx, 2000. "Using categorical variables in Stata," Stata Technical Bulletin, StataCorp LP, vol. 9(52).
  9. repec:ebl:ecbull:v:10:y:2007:i:6:p:1-11 is not listed on IDEAS
  10. David Neumark, 1988. "Employers' Discriminatory Behavior and the Estimation of Wage Discrimination," Journal of Human Resources, University of Wisconsin Press, vol. 23(3), pages 279-295.
  11. Dolton, P J & Makepeace, G H, 1986. "Sample Selection and Male-Female Earnings Differentials in the Graduate Labour Market," Oxford Economic Papers, Oxford University Press, vol. 38(2), pages 317-41, July.
  12. Kennedy, Peter, 1986. "Interpreting Dummy Variables," The Review of Economics and Statistics, MIT Press, vol. 68(1), pages 174-75, February.
  13. Shoshana Neuman & Ronald Oaxaca, 2004. "Wage Decompositions with Selectivity-Corrected Wage Equations: A Methodological Note," Journal of Economic Inequality, Springer, vol. 2(1), pages 3-10, April.
  14. William C. Horrace & Ronald L. Oaxaca, 2001. "Inter-industry wage differentials and the gender wage gap: An identification problem," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 54(3), pages 611-618, April.
  15. T.D. Stanley & Stephen B. Jarrell, 1998. "Gender Wage Discrimination Bias? A Meta-Regression Analysis," Journal of Human Resources, University of Wisconsin Press, vol. 33(4), pages 947-973.
  16. Helena Skyt Nielsen, 2000. "Wage discrimination in Zambia: an extension of the Oaxaca-Blinder decomposition," Applied Economics Letters, Taylor & Francis Journals, vol. 7(6), pages 405-408.
  17. Reimers, Cordelia W, 1983. "Labor Market Discrimination against Hispanic and Black Men," The Review of Economics and Statistics, MIT Press, vol. 65(4), pages 570-79, November.
  18. Oaxaca, Ronald L. & Ransom, Michael R., 1994. "On discrimination and the decomposition of wage differentials," Journal of Econometrics, Elsevier, vol. 61(1), pages 5-21, March.
  19. Cotton, Jeremiah, 1988. "On the Decomposition of Wage Differentials," The Review of Economics and Statistics, MIT Press, vol. 70(2), pages 236-43, May.
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