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Decomposing Wage Distributions Using Recentered Influence Function Regressions

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  • Sergio P. Firpo

    (Insper Institute of Education and Research, R. Quatá, 300, São Paulo–SP 04546-042, Brazil)

  • Nicole M. Fortin

    (Vancouver School of Economics, University of British Columbia, 6000 Iona Drive, Vancouver, BC V6T 1L4, Canada)

  • Thomas Lemieux

    (Vancouver School of Economics, University of British Columbia, 6000 Iona Drive, Vancouver, BC V6T 1L4, Canada)

Abstract

This paper provides a detailed exposition of an extension of the Oaxaca-Blinder decomposition method that can be applied to various distributional measures. The two-stage procedure first divides distributional changes into a wage structure effect and a composition effect using a reweighting method. Second, the two components are further divided into the contribution of each explanatory variable using recentered influence function (RIF) regressions. We illustrate the practical aspects of the procedure by analyzing how the polarization of U.S. male wages between the late 1980s and the mid 2010s was affected by factors such as de-unionization, education, occupations, and industry changes.

Suggested Citation

  • Sergio P. Firpo & Nicole M. Fortin & Thomas Lemieux, 2018. "Decomposing Wage Distributions Using Recentered Influence Function Regressions," Econometrics, MDPI, vol. 6(2), pages 1-40, May.
  • Handle: RePEc:gam:jecnmx:v:6:y:2018:i:2:p:28-:d:149033
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