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Standard Errors for the Blinder-Oaxaca Decomposition

  • Ben Jann

    ()

    (Soziologie, ETH Zurich)

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The decomposition technique introduced by Blinder (1973) and Oaxaca (1973) is widely used to study outcome differences between groups. For example, the technique is commonly applied to the analysis of the gender wage gap. However, despite the procedure's frequent use, very little attention has been paid to the issue of estimating the sampling variances of the decomposition components. We therefore suggest an approach that introduces consistent variance estimators for several variants of the decomposition. The accuracy of the new estimators under ideal conditions is illustrated with the results of a Monte Carlo simulation. As a second check, the estimators are compared to bootstrap results obtained using real data. In contrast to previously proposed statistics, the new method takes into account the extra variation imposed by stochastic regressors.

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File URL: http://repec.org/dsug2005/oaxaca_se_handout.pdf
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Paper provided by Stata Users Group in its series German Stata Users' Group Meetings 2005 with number 03.

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Date of creation: 03 Apr 2005
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Handle: RePEc:boc:dsug05:03
Contact details of provider: Web page: http://www.stata.com/meeting/3german

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