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The easiest way to estimate the Oaxaca-Blinder decomposition

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  • Liliane Bonnal
  • Rachid Boumahdi
  • Pascal Favard

Abstract

This article studies the relation between the Oaxaca-Blinder decomposition and the estimated coefficient of a dummy variable for a linear regression. We calculate the unexplained part of the decomposition from the estimated coefficient of the dummy variable. More precisely, if the exogenous variables are uncorrelated to the dummy variable, the estimated coefficient and its variance give directly the value and the variance of the unexplained part of the decomposition. If the independent variables are correlated a simple relation is obtained. Moreover, we show that the significance of the unexplained part can be deduced from the significance of the estimated coefficient of the dummy variable.

Suggested Citation

  • Liliane Bonnal & Rachid Boumahdi & Pascal Favard, 2013. "The easiest way to estimate the Oaxaca-Blinder decomposition," Applied Economics Letters, Taylor & Francis Journals, vol. 20(1), pages 96-101, January.
  • Handle: RePEc:taf:apeclt:v:20:y:2013:i:1:p:96-101
    DOI: 10.1080/13504851.2012.681021
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    File URL: http://hdl.handle.net/10.1080/13504851.2012.681021
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    References listed on IDEAS

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    1. Jeffrey M Wooldridge, 2010. "Econometric Analysis of Cross Section and Panel Data," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262232588, January.
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    Cited by:

    1. Ilke Onur & Malathi Velamuri, 2016. "A Life Course Perspective on Gender Differences in Cognitive Functioning in India," Journal of Human Capital, University of Chicago Press, vol. 10(4), pages 520-563.

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