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A Stata implementation of the Blinder-Oaxaca decomposition

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Listed author(s):
  • Ben Jann

    ()

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Abstract

The counterfactual decomposition technique popularized by Blinder (1973) and Oaxaca (1973) is widely used to study mean outcome differences between groups. For example, the technique is often used to analyze wage gaps by sex or race. The present paper summarizes the technique and addresses a number of complications such as the identification of effects of categorical predictors in the detailed decomposition or the estimation of standard errors. A new Stata command called -oaxaca- is introduced and examples illustrating its usage are given.

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File URL: http://repec.ethz.ch/ets/papers/jann_oaxaca.pdf
File Function: Revised version, 2008
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Paper provided by ETH Zurich, Chair of Sociology in its series ETH Zurich Sociology Working Papers with number 5.

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Length: 25 pages
Date of creation: 05 May 2008
Date of revision: 14 May 2008
Handle: RePEc:ets:wpaper:5
Contact details of provider: Web page: http://www.socio.ethz.ch/

Keywords: Stata; Blinder-Oaxaca decomposition; outcome differential; wage gap;

Other versions of this item:

Find related papers by JEL classification:
  • C49 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Other
  • C87 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Econometric Software
  • 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

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  1. John P. Haisken-DeNew & Christoph M. Schmidt, 2000. "Interindustry and Interregion Differentials: Mechanics and Interpretation," The Review of Economics and Statistics, MIT Press, vol. 79(3), pages 516-521, August.
  2. Jacques Silber & Michal Weber, 1999. "Labour market discrimination: are there significant differences between the various decomposition procedures?," Applied Economics, Taylor & Francis Journals, vol. 31(3), pages 359-365.
  3. F. L. Jones, 1983. "On Decomposing the Wage Gap: A Critical Comment on Blinder's Method," Journal of Human Resources, University of Wisconsin Press, vol. 18(1), pages 126-130.
  4. Doris Weichselbaumer & Rudolf Winter-Ebmer, 2005. "A Meta-Analysis of the International Gender Wage Gap," Journal of Economic Surveys, Wiley Blackwell, vol. 19(3), pages 479-511, 07.
  5. Helena Skyt Nielsen, 2000. "Wage discrimination in Zambia: an extension of the Oaxaca-Blinder decomposition," Applied Economics Letters, Taylor & Francis Journals, vol. 7(6), pages 405-408.
  6. Kennedy, Peter, 1986. "Interpreting Dummy Variables," The Review of Economics and Statistics, MIT Press, vol. 68(1), pages 174-175, February.
  7. Owen O'Donnell & Eddy van Doorslaer & Adam Wagstaff & Magnus Lindelow, 2008. "Analyzing Health Equity Using Household Survey Data : A Guide to Techniques and Their Implementation," World Bank Publications, The World Bank, number 6896, October.
  8. Oaxaca, Ronald, 1973. "Male-Female Wage Differentials in Urban Labor Markets," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 14(3), pages 693-709, October.
  9. F. L. Jones & Jonathan Kelley, 1984. "Decomposing Differences between Groups," Sociological Methods & Research, , vol. 12(3), pages 323-343, February.
  10. Alan S. Blinder, 1973. "Wage Discrimination: Reduced Form and Structural Estimates," Journal of Human Resources, University of Wisconsin Press, vol. 8(4), pages 436-455.
  11. Javier Gardeazabal & Arantza Ugidos, 2004. "More on Identification in Detailed Wage Decompositions," The Review of Economics and Statistics, MIT Press, vol. 86(4), pages 1034-1036, November.
  12. John Hendrickx, 2000. "Using categorical variables in Stata," Stata Technical Bulletin, StataCorp LP, vol. 9(52).
  13. Suits, Daniel B, 1984. "Dummy Variables: Mechanics v. Interpretation," The Review of Economics and Statistics, MIT Press, vol. 66(1), pages 177-180, February.
  14. Cotton, Jeremiah, 1988. "On the Decomposition of Wage Differentials," The Review of Economics and Statistics, MIT Press, vol. 70(2), pages 236-243, May.
  15. repec:ebl:ecbull:v:3:y:2007:i:66:p:1-7 is not listed on IDEAS
  16. Reimers, Cordelia W, 1983. "Labor Market Discrimination against Hispanic and Black Men," The Review of Economics and Statistics, MIT Press, vol. 65(4), pages 570-579, November.
  17. repec:ebl:ecbull:v:10:y:2007:i:6:p:1-11 is not listed on IDEAS
  18. William C. Horrace & Ronald L. Oaxaca, 2001. "Inter-Industry Wage Differentials and the Gender Wage Gap: An Identification Problem," ILR Review, Cornell University, ILR School, vol. 54(3), pages 611-618, April.
  19. Dolton, P J & Makepeace, G H, 1986. "Sample Selection and Male-Female Earnings Differentials in the Graduate Labour Market," Oxford Economic Papers, Oxford University Press, vol. 38(2), pages 317-341, July.
  20. Shoshana Neuman & Ronald Oaxaca, 2004. "Wage Decompositions with Selectivity-Corrected Wage Equations: A Methodological Note," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 2(1), pages 3-10, April.
  21. David Neumark, 1988. "Employers' Discriminatory Behavior and the Estimation of Wage Discrimination," Journal of Human Resources, University of Wisconsin Press, vol. 23(3), pages 279-295.
  22. Keshab Shrestha & Chris Sakellariou, 1996. "Wage discrimination: a statistical test," Applied Economics Letters, Taylor & Francis Journals, vol. 3(10), pages 649-651.
  23. 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.
  24. T.D. Stanley & Stephen B. Jarrell, 1998. "Gender Wage Discrimination Bias? A Meta-Regression Analysis," Journal of Human Resources, University of Wisconsin Press, vol. 33(4), pages 947-973.
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