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Normalized Equation and Decomposition Analysis: Computation and Inference

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  • Yun, Myeong-Su

    (Inha University)

Abstract

This paper joins discussions on normalized regression and decomposition equations in devising a simple and general algorithm for obtaining the normalized regression and applying it to the Oaxaca decomposition. This resolves the invariance problem in the detailed Oaxaca decomposition. An algorithm to calculate an asymptotic covariance matrix for estimates in the normalized regression for hypothesis testing is also derived. We extend these algorithms to non-linear equations where the underlying equation is linear and decompose differences in the first moment.

Suggested Citation

  • Yun, Myeong-Su, 2005. "Normalized Equation and Decomposition Analysis: Computation and Inference," IZA Discussion Papers 1822, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp1822
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    2. Albert López-Ibor, Rocío & Escot Mangas, Lorenzo & Fernández Cornejo, José Andrés, 2010. "La predisposición de las estudiantes universitarias a auto-limitarse profesionalmente en el futuro por razones de conciliación/The Predisposition of Feminine University Students to Professional Self-L," Estudios de Economia Aplicada, Estudios de Economia Aplicada, vol. 28, pages 203(32á)-20, Abril.
    3. Carlos Gradin, 2009. "Why is Poverty So High Among Afro-Brazilians? A Decomposition Analysis of the Racial Poverty Gap," Journal of Development Studies, Taylor & Francis Journals, vol. 45(9), pages 1426-1452.
    4. Moral De Blas, Alfonso & Martín-Román, Ángel & Rodríguez Caballero, Juan Carlos, 2013. "El papel de las ETTs en la reducción del riesgo moral asociado al seguro por accidentes de trabajo: El caso de España/The Role of the TWAs in the Reduction of Moral Hazard in Workplace Accident Insura," Estudios de Economia Aplicada, Estudios de Economia Aplicada, vol. 31, pages 497-522, Septiembr.
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    6. Fossen, Frank M., 2019. "Entrepreneurship over the Business Cycle in the United States: A Decomposition," IZA Discussion Papers 12499, Institute of Labor Economics (IZA).
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    More about this item

    Keywords

    normalized regression; detailed decomposition; invariance; identification; characteristics effect; coefficients effect;
    All these keywords.

    JEL classification:

    • C20 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - General
    • J70 - Labor and Demographic Economics - - Labor Discrimination - - - General

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