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Matching as a Tool to Decompose Wage Gaps

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Author Info
Hugo Nopo ()

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Abstract

In this paper I present a methodology that uses matching comparisons to explain gender differences in wages. The approach emphasizes gender differences in the supports of the distributions of observable characteristics and provides useful insights about the distribution of the unexplained gender differences in pay. The proposed methodology, a non-parametric alternative to the Blinder-Oaxaca (BO) wage gap decomposition, does not require the estimation of earnings equations. It breaks down the gap into four additive elements, two of which are analogous to the elements of the BO decompostion (but computed only over the common support of the distributions of characteristics), while the other two account for differences in the supports. Using data for Peru in the period 1986-2000, I found that this problem of non-comparability accounts for 23% and 30% of the male and female working populations respectively. The matching methodology allows us to quantify the effect of explicitly recognizing these differences in the supports. In this way, the 45% gender wage gap in Peru is decomposed as: 11% explained by differences in the supports, 6% explained by differences in the distributions of individual characteristics and the remaining 28% cannot be explained by differences in observable individuals' characteristics. Approximately half of the latter is due to unexplained differences in the highest quintile of the wage distribution.

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Paper provided by Middlebury College, Department of Economics in its series Middlebury College Working Paper Series with number 0406.

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Length: 49 pages
Date of creation: Jun 2004
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Handle: RePEc:mdl:mdlpap:0406

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Related research
Keywords: matching; non-parametric; gender wage gap; Latin America;

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Find related papers by JEL classification:
C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Semiparametric and Nonparametric Methods
D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
J16 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Gender; Non-labor Discrimination
O54 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean

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References listed on IDEAS
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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    Other versions:
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    Other versions:
  3. Jeffrey Smith & Petra Todd, 2003. "Does Matching Overcome Lalonde's Critique of Nonexperimental Estimators?," University of Western Ontario, CIBC Human Capital and Productivity Project Working Papers 20035, University of Western Ontario, CIBC Human Capital and Productivity Project. [Downloadable!]
    Other versions:
  4. Donald, Stephen G & Green, David A & Paarsch, Harry J, 2000. "Differences in Wage Distributions between Canada and the United States: An Application of a Flexible Estimator of Distribution Functions in the Presence of Covariates," Review of Economic Studies, Blackwell Publishing, vol. 67(4), pages 609-33, October.
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  21. 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. [Downloadable!] (restricted)
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Cited by:
(explanations, 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.)

  1. Bernd Görzig & Martin Gornig & Axel Werwatz, 2007. "Produktvielfalt und Produktivität der IKT-Produzenten:Eine Analyse unter Nutzung verbundener amtlicher Unternehmensdaten," AStA Wirtschafts- und Sozialstatistisches Archiv, Springer, vol. 1(2), pages 145-161, October. [Downloadable!] (restricted)
  2. Dragana Djurdjevic & Sergiy Radyakin, 2005. "Decomposition of the Gender Wage Gap Using Matching: an Application for Switzerland," Darmstadt Discussion Papers in Economics 155, Institut für Volkswirtschaftslehre (Department of Economics), Technische Universität Darmstadt (Darmstadt University of Technology). [Downloadable!]
    Other versions:
  3. Bernd Görzig & Martin Gornig & Axel Werwatz, 2006. "East Germany’s Wage Gap: A non-parametric decomposition based on establishment characteristics," SFB 649 Discussion Papers SFB649DP2006-044, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany. [Downloadable!]
    Other versions:
  4. Hirsch, Boris & König, Marion & Möller, Joachim, 2009. "Is There a Gap in the Gap? Regional Differences in the Gender Pay Gap," IZA Discussion Papers 4231, Institute for the Study of Labor (IZA). [Downloadable!]
  5. Sebastian Calonico & Hugo Ñopo, 2008. "Segregación de genero en el trabajo y diferenciales de salario: Evidencia de las zonas urbanas de Mexico 1994-2004," RES Working Papers 4580, Inter-American Development Bank, Research Department. [Downloadable!]
  6. Stepán Jurajda & Teodora Paligorova, 2006. "Female Managers and their Wages in Central Europe," IZA Discussion Papers 2303, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  7. H Gravelle & A Risa Hole, 2008. "Measuring and testing for gender discrimination in professions: the case of English family doctors," Discussion Papers 08/27, Department of Economics, University of York. [Downloadable!]
  8. Wagner, Joachim, 2004. "What a Difference a Y Makes: Female and Male Nascent Entrepreneurs in Germany," IZA Discussion Papers 1134, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  9. BERND GÖRZIG & MARTIN GORNIG & AXEL WERWATZ, 2005. "Explaining Eastern Germany's Wage Gap: The Impact of Structural Change," Post-Communist Economies, Taylor and Francis Journals, vol. 17(4), pages 449-464, December. [Downloadable!] (restricted)
  10. repec:ese:iserwp: is not listed on IDEAS
  11. Sebastian Calonico & Hugo Ñopo, 2008. "Gender Segregation in the Workplace and Wage Gaps: Evidence from Urban Mexico 1994-2004," RES Working Papers 4579, Inter-American Development Bank, Research Department. [Downloadable!]
  12. Van Kerm, Philippe, 2009. "Generalized measures of wage differentials," IRISS Working Paper Series 2009-08, IRISS at CEPS/INSTEAD. [Downloadable!]
  13. Lourdes Gallardo & Hugo Nopo, 2009. "Ethnic and Gender Wage Gaps in Ecuador," RES Working Papers 4625, Inter-American Development Bank, Research Department. [Downloadable!]
  14. Hugo Ñopo, 2007. "An Extension of the Blinder-Oaxaca Decomposition to a Continuum of Comparison Groups," IZA Discussion Papers 2921, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  15. Bernd Görzig & Martin Gornig & Axel Werwatz, 2006. "Firm Specific Wage Spread in Germany - Decomposition of regional differences in inter firm wage dispersion," SFB 649 Discussion Papers SFB649DP2006-045, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany. [Downloadable!]
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