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Additive Decompositions with Interaction Effects

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  • Biewen, Martin

    (University of Tuebingen)

Abstract

This paper proposes a comprehensive, path-independent decomposition formula of changes into ceteris paribus effects and interaction effects. The formula implies a reassessment of sequential decomposition methods that are widely used in the literature and that are restrictive in how they treat interaction effects. If counterfactual outcomes are correctly specified, it may also be viewed as a description of certain aspects of causality in the situation where more than one causal influence is present.

Suggested Citation

  • Biewen, Martin, 2012. "Additive Decompositions with Interaction Effects," IZA Discussion Papers 6730, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp6730
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    3. Christina Boll & Julian Sebastian Leppin, 2016. "Differential Overeducation in East and West Germany: Extending Frank's Theory on Economic Returns Changes the Picture of Disadvantaged Women," LABOUR, CEIS, vol. 30(4), pages 455-504, December.
    4. Farzana Afridi & Taryn Dinkelman & Kanika Mahajan, 2018. "Why are fewer married women joining the work force in rural India? A decomposition analysis over two decades," Journal of Population Economics, Springer;European Society for Population Economics, vol. 31(3), pages 783-818, July.
    5. Anna Naszodi & Francisco Mendonca, 2021. "A new method for identifying what Cupid's invisible hand is doing. Is it spreading color blindness while turning us more "picky'' about spousal education?," Papers 2103.06991, arXiv.org, revised Feb 2023.
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    7. Naszódi, Anna, 2022. "Hogyan szálazzuk szét a megfigyelhető változások okait? [Decomposing observable changes into their causes]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(11), pages 1407-1432.
    8. Juan F. Castro, 2015. "Linear decompositions of cognitive achievement gaps a cautionary note and an illustration using peruvian data," Working Papers 15-08, Centro de Investigación, Universidad del Pacífico.
    9. Castro, Juan F. & Rolleston, Caine, 2018. "The contribution of early childhood and schools to cognitive gaps: New evidence from Peru," Economics of Education Review, Elsevier, vol. 64(C), pages 144-164.
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    More about this item

    Keywords

    Oaxaca-Blinder decomposition; interaction effects; ceteris paribus effects;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J71 - Labor and Demographic Economics - - Labor Discrimination - - - Hiring and Firing
    • C02 - Mathematical and Quantitative Methods - - General - - - Mathematical Economics
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution

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