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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. repec:ebl:ecbull:v:10:y:2007:i:6:p:1-11 is not listed on IDEAS
  2. John P. Haisken-DeNew & Christoph M. Schmidt, . "Inter-Industry and Inter-Region Differentials: Mechanics and Interpretation," Working Papers 9504, SELAPO Center for Human Resources.
  3. Jacques Silber & Michal Weber, 1999. "Labour market discrimination: are there significant differences between the various decomposition procedures?," Applied Economics, Taylor and Francis Journals, vol. 31(3), pages 359-365.
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  7. Helena Skyt Nielsen, 2000. "Wage discrimination in Zambia: an extension of the Oaxaca-Blinder decomposition," Applied Economics Letters, Taylor and Francis Journals, vol. 7(6), pages 405-408.
  8. John Hendrickx, 2000. "Using categorical variables in Stata," Stata Technical Bulletin, StataCorp LP, vol. 9(52).
  9. 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.
  10. Javier Gardeazabal & Aratza Ugidos, . "More on identification in detailed wage decompositions," Studies on the Spanish Economy 140, FEDEA.
  11. 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.
  12. David Neumark, 1987. "Employers' discriminatory behavior and the estimation of wage discrimination," Special Studies Papers 227, Board of Governors of the Federal Reserve System (U.S.).
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  15. repec:ebl:ecbull:v:3:y:2007:i:66:p:1-7 is not listed on IDEAS
  16. Kennedy, Peter, 1986. "Interpreting Dummy Variables," The Review of Economics and Statistics, MIT Press, vol. 68(1), pages 174-75, February.
  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.
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