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On the sensitivity of wage gap decompositions

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  • Huber, Martin
  • Solovyeva, Anna

Abstract

This paper investigates the sensitivity of average wage gap decompositions to methods resting on different assumptions regarding endogeneity of observed characteristics, sample selection into employment, and estimators’functional form. Applying five distinct decomposition techniques to estimate the gender wage gap in the U.S. using data from the National Longitudinal Survey of Youth 1979, we find that the magnitudes of the wage gap components are generally not stable across methods. Furthermore, the definition of the observed characteristics matters: merely including their levels (as frequently seen in wage decompositions) entails smaller explained and larger unexplained components than when including both their levels and histories in the analysis. Given the sensitivity of our results, we advise caution when using wage decompositions for policy recommendations.

Suggested Citation

  • Huber, Martin & Solovyeva, Anna, 2018. "On the sensitivity of wage gap decompositions," FSES Working Papers 497, Faculty of Economics and Social Sciences, University of Freiburg/Fribourg Switzerland.
    • Handle: RePEc:fri:fribow:fribow00497
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    More about this item

    Keywords

    Wage decomposition; gender wage gap; causal mechanisms; mediation;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • 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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