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An Oaxaca decomposition for nonlinear models

Author

Listed:
  • Stephen Bazen

    (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - ECM - Ecole Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique - AMU - Aix Marseille Université - EHESS - École des hautes études en sciences sociales)

  • Xavier Joutard

    () (LEST - Laboratoire d'économie et de sociologie du travail - AMU - Aix Marseille Université - CNRS - Centre National de la Recherche Scientifique)

  • Brice Magdalou

    (LAMETA - Laboratoire Montpelliérain d'Économie Théorique et Appliquée - UM1 - Université Montpellier 1 - UM3 - Université Paul-Valéry - Montpellier 3 - Montpellier SupAgro - Centre international d'études supérieures en sciences agronomiques - INRA Montpellier - Institut national de la recherche agronomique [Montpellier] - UM - Université de Montpellier - CNRS - Centre National de la Recherche Scientifique - Montpellier SupAgro - Institut national d’études supérieures agronomiques de Montpellier)

Abstract

The widely used Oaxaca decomposition applies to linear models. Extending it to commonly used nonlinear models such as duration models is not straightforward. This paper shows that the original decomposition that uses a linear model can also be obtained by an application of the mean value theorem. By extension, this basis provides a means of obtaining a decomposition formula which applies to nonlinear models which are continuous functions. The detailed decomposition of the explained component is expressed in terms of what are usually referred to as marginal effects. Explicit formulae are provided for the decomposition of some nonlinear models commonly used in applied econometrics including binary choice, duration and Box-Cox models.

Suggested Citation

  • Stephen Bazen & Xavier Joutard & Brice Magdalou, 2017. "An Oaxaca decomposition for nonlinear models," Post-Print hal-01684635, HAL.
  • Handle: RePEc:hal:journl:hal-01684635
    DOI: 10.3233/JEM-170439
    Note: View the original document on HAL open archive server: https://hal-amu.archives-ouvertes.fr/hal-01684635
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    References listed on IDEAS

    as
    1. Baker, G M & Trivedi, P K, 1985. "Estimation of Unemployment Duration from Grouped Data: A Comparative Study," Journal of Labor Economics, University of Chicago Press, vol. 3(2), pages 153-174, April.
    2. Stephen Bazen & Xavier Joutard & Mouhamadou Niang, 2014. "The measurement of unemployment using completed durations: evidence on the gender gap in unemployment in France," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 12(4), pages 517-534, December.
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    More about this item

    Keywords

    Oaxaca decomposition; nonlinear models; duration models; binary choice; Box-Cox transformation;

    JEL classification:

    • A13 - General Economics and Teaching - - General Economics - - - Relation of Economics to Social Values

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