Accounting for the Black-White Wealth Gap: A Nonparametric Approach
This paper notes a potential problem in the method of Blinder and Oaxaca the most popular method in the literature for decomposing the mean difference between groups of a given variable into the portion attributable to differences in the distribution of some explanatory variables and differences in the conditional expectation functions. In its conventional application, the Blinder-Oaxaca method requires that a parametric assumption be made about the form of the conditional expectations function. We show that misspecification is likely to result in non-trivial errors in inference regarding the portion attributable to differences in the distribution of explanatory variables. A nonparametric alternative to the Blinder-Oaxaca method is proposed. Rather than specify an arbitrary functional form for the conditional expectations function, the method re-weights the empirical distribution of the outcome variable using weights that equalize the empirical distributions of the explanatory variable. Applying this method to the large black-white gap in net worth, we document a substantial difference in the estimated role of earnings differences between the two methods. Our estimates suggest that differences in earnings account for roughly two-thirds of the overall wealth gap.
|Date of creation:||Sep 2001|
|Publication status:||published as Barsky, Robert, John Bound, Kerwin Kofi Charles and Joseph P. Lupton. "Accounting For The Black-White Wealth Gap: A Nonparametric Approach," Journal of the American Statistical Association, 2002, v97(459,Sep), 663-673.|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
Web page: http://www.nber.org
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- James J. Heckman & Hidehiko Ichimura & Petra E. Todd, 1997. "Matching As An Econometric Evaluation Estimator: Evidence from Evaluating a Job Training Programme," Review of Economic Studies, Oxford University Press, vol. 64(4), pages 605-654.
- Francine D. Blau & John W. Graham, 1990.
"Black-White Differences in Wealth and Asset Composition,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 105(2), pages 321-339.
- Francine D. Blau & John W. Graham, 1989. "Black-White Differences in Wealth and Asset Composition," NBER Working Papers 2898, National Bureau of Economic Research, Inc.
- 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.
- Erik Hurst & Ming Ching Luoh & Frank P. Stafford, 1998. "The Wealth Dynamics of American Families, 1984-94," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 29(1), pages 267-338.
- 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.
- White, Halbert, 1980. "Using Least Squares to Approximate Unknown Regression Functions," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 21(1), pages 149-170, February.
- Edward N. Wolff, "undated". "Racial Wealth Disparities Is the Gap Closing?," Economics Public Policy Brief Archive ppb_66, Levy Economics Institute.
- Maury Gittleman & Edward N. Wolff, 2000. "Racial Wealth Disparities: Is the Gap Closing?," Macroeconomics 0004058, EconWPA.
- Maury Gittleman & Edward N. Wolff, 2000. "Racial Wealth Disparities: Is the Gap Closing?," Economics Working Paper Archive wp_311, Levy Economics Institute.
- Joseph G. Altonji & Ulrich Doraszelski, 2005. "The Role of Permanent Income and Demographics in Black/White Differences in Wealth," Journal of Human Resources, University of Wisconsin Press, vol. 40(1).
- Joseph G. Altonji & Ulrich Doraszelski, 2000. "The Role of Permanent Income and Demographics in Black/White Differences in Wealth," Working Papers 850, Economic Growth Center, Yale University.
- Joseph G. Altonji & Ulrich Doraszelski, 2001. "The Role of Permanent Income and Demographics in Black/White Differences in Wealth," NBER Working Papers 8473, National Bureau of Economic Research, Inc.
- Edward N. Wolff, 1998. "Recent Trends in the Size Distribution of Household Wealth," Journal of Economic Perspectives, American Economic Association, vol. 12(3), pages 131-150, Summer.
- Joseph Altonji & Ulrich Doraszelski & Lewis M. Segal, 2000. "Black/white differences in wealth," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q I, pages 38-50.
- 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.
- James J. Heckman & Hidehiko Ichimura & Petra Todd, 1998. "Matching As An Econometric Evaluation Estimator," Review of Economic Studies, Oxford University Press, vol. 65(2), pages 261-294. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:8466. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.