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A Note on Variance Estimation for the Oaxaca Estimator of Average Treatment Effects

  • Patrick M. Kline

We derive the limiting distribution of the Oaxaca estimator of average treatment effects studied by Kline (2011). A consistent estimator of the asymptotic variance is proposed that makes use of standard regression routines. It is shown that ignoring uncertainty in group means will tend to lead to an overstatement of the asymptotic standard errors. Monte Carlo experiments examine the finite sample performance of competing approaches to inference.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 19784.

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Date of creation: Jan 2014
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Publication status: published as Kline, Patrick, 2014. "A note on variance estimation for the Oaxaca estimator of average treatment effects," Economics Letters, Elsevier, vol. 122(3), pages 428-431.
Handle: RePEc:nbr:nberwo:19784
Note: LS TWP
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  1. Kline, Patrick & Moretti, Enrico, 2013. "Local Economic Development, Agglomeration Economies, and the Big Push: 100 Years of Evidence from the Tennessee Valley Authority," CEPR Discussion Papers 9593, C.E.P.R. Discussion Papers.
  2. Wooldridge, Jeffrey M., 2007. "Inverse probability weighted estimation for general missing data problems," Journal of Econometrics, Elsevier, vol. 141(2), pages 1281-1301, December.
  3. Matias Busso & Jesse Gregory & Patrick Kline, 2013. "Assessing the Incidence and Efficiency of a Prominent Place Based Policy," American Economic Review, American Economic Association, vol. 103(2), pages 897-947, April.
  4. Ronald Oaxaca, 1971. "Male-Female Wage Differentials in Urban Labor Markets," Working Papers 396, Princeton University, Department of Economics, Industrial Relations Section..
  5. Chesher, Andrew, 1995. "A Mirror Image Invariance for M-Estimators," Econometrica, Econometric Society, vol. 63(1), pages 207-11, January.
  6. Patrick Kline, 2011. "Oaxaca-Blinder as a Reweighting Estimator," American Economic Review, American Economic Association, vol. 101(3), pages 532-37, May.
  7. Jeffrey M. Wooldridge, 2002. "Inverse probability weighted M-estimators for sample selection, attrition and stratification," CeMMAP working papers CWP11/02, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
  8. Fortin, Nicole & Lemieux, Thomas & Firpo, Sergio, 2011. "Decomposition Methods in Economics," Handbook of Labor Economics, Elsevier.
  9. 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.
  10. Heckman, James J. & Robb, Richard Jr., 1985. "Alternative methods for evaluating the impact of interventions : An overview," Journal of Econometrics, Elsevier, vol. 30(1-2), pages 239-267.
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