An Extension of the Blinder-Oaxaca Decomposition Technique to Logit and Probit Models
AbstractThe Blinder-Oaxaca decomposition technique is widely used to identify and quantify the separate contributions of group differences in measurable characteristics, such as education, experience, marital status, and geographical differences to racial and gender gaps in outcomes. The technique cannot be used directly, however, if the outcome is binary and the coefficients are from a logit or probit model. I describe a relatively simple method of performing a decomposition that uses estimates from a logit or probit model. Expanding on the original application of the technique in Fairlie (1999), I provide a more thorough discussion of how to apply the technique, an analysis of the sensitivity of the decomposition estimates to different parameters, and the calculation of standard errors. I also compare the estimates to Blinder-Oaxaca decomposition estimates and discuss an example of when the Blinder-Oaxaca technique may be problematic.
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Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1917.
Length: 19 pages
Date of creation: Jan 2006
Date of revision:
Publication status: published in: Journal of Economic and Social Measurement, 2005, 30(4), 305-316
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Other versions of this item:
- Robert W. Fairlie, 2003. "An Extension of the Blinder-Oaxaca Decomposition Technique to Logit and Probit Models," Working Papers 873, Economic Growth Center, Yale University.
- C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
- J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination
- J16 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Gender; Non-labor Discrimination
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-01-24 (All new papers)
- NEP-DCM-2006-01-24 (Discrete Choice Models)
- NEP-ECM-2006-01-24 (Econometrics)
- NEP-LAB-2006-01-24 (Labour Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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