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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. 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.
  2. 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, vol. 14(3), pages 693-709, October.
  3. 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.
  4. John P. Haisken-DeNew & Christoph M. Schmidt, 2000. "Interindustry and Interregion Differentials: Mechanics and Interpretation," The Review of Economics and Statistics, MIT Press, vol. 79(3), pages 516-521, August.
  5. 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.).
  6. Doris Weichselbaumer & Rudolf Winter-Ebmer, 2003. "A meta-analysis of the international gender wage gap," Economics working papers 2003-11, Department of Economics, Johannes Kepler University Linz, Austria.
  7. 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.
  8. 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.
  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. 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.
  11. Keshab Shrestha & Chris Sakellariou, 1996. "Wage discrimination: a statistical test," Applied Economics Letters, Taylor & Francis Journals, vol. 3(10), pages 649-651.
  12. 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.
  13. Cotton, Jeremiah, 1988. "On the Decomposition of Wage Differentials," The Review of Economics and Statistics, MIT Press, vol. 70(2), pages 236-43, May.
  14. Suits, Daniel B, 1984. "Dummy Variables: Mechanics v. Interpretation," The Review of Economics and Statistics, MIT Press, vol. 66(1), pages 177-80, February.
  15. Kennedy, Peter, 1986. "Interpreting Dummy Variables," The Review of Economics and Statistics, MIT Press, vol. 68(1), pages 174-75, February.
  16. Javier Gardeazabal & Aratza Ugidos, . "More on identification in detailed wage decompositions," Studies on the Spanish Economy 140, FEDEA.
  17. 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.
  18. 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.
  19. 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.
  20. repec:ebl:ecbull:v:10:y:2007:i:6:p:1-11 is not listed on IDEAS
  21. John Hendrickx, 2000. "Using categorical variables in Stata," Stata Technical Bulletin, StataCorp LP, vol. 9(52).
  22. repec:ebl:ecbull:v:3:y:2007:i:66:p:1-7 is not listed on IDEAS
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