IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

Decomposing Differences in Arithmetic Means: A Doubly-Robust Estimation Approach

Listed author(s):
  • Boris Kaiser

When decomposing differences in average economic outcome between two groups of individuals, it is common practice to base the analysis on logarithms if the dependent variable is nonnegative. This paper argues that this approach raises a number of undesired statistical and conceptual issues because decomposition terms have the interpretation of approximate percentage differences in geometric means. Instead, we suggest that the analysis should be based on the arithmetic means of the original dependent variable. We present a flexible parametric decomposition framework that can be used for all types of continuous (or count) nonnegative dependent variables. In particular, we derive a propensity-score-weighted estimator for the aggregate decomposition that is "doubly robust", that is, consistent under two separate sets of assumptions. A comparative Monte Carlo study illustrates that the proposed estimator performs well in a many situations. An application to the union wage gap in the United States finds that the importance of the unexplained union wage premium is much smaller than suggested by the standard log-wage decomposition.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.vwl.unibe.ch/papers/dp/dp1308.pdf
Download Restriction: no

Paper provided by Universitaet Bern, Departement Volkswirtschaft in its series Diskussionsschriften with number dp1308.

as
in new window

Length:
Date of creation: Oct 2013
Handle: RePEc:ube:dpvwib:dp1308
Contact details of provider: Postal:
Schanzeneckstr. 1, PF 8573, CH-3001 Bern

Phone: 0041 31 631 45 06
Fax: 41 31 631 37 83
Web page: http://www.vwi.unibe.ch/content/publikationen/index_eng.html

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.:

as
in new window


  1. Richard K. Crump & V. Joseph Hotz & Guido W. Imbens & Oscar A. Mitnik, 2009. "Dealing with limited overlap in estimation of average treatment effects," Biometrika, Biometrika Trust, vol. 96(1), pages 187-199.
  2. Myeong-Su Yun, 2005. "A Simple Solution to the Identification Problem in Detailed Wage Decompositions," Economic Inquiry, Western Economic Association International, vol. 43(4), pages 766-772, October.
  3. Derek Leslie & Phil Murphy, 1997. "Measuring discrimination by decomposing earnings functions," Applied Economics Letters, Taylor & Francis Journals, vol. 4(2), pages 117-120.
  4. Słoczyński, Tymon, 2012. "New Evidence on Linear Regression and Treatment Effect Heterogeneity," MPRA Paper 39524, University Library of Munich, Germany.
  5. Martin Huber, 2015. "Causal Pitfalls in the Decomposition of Wage Gaps," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 33(2), pages 179-191, April.
  6. Jacob A. Mincer, 1974. "Introduction to "Schooling, Experience, and Earnings"," NBER Chapters,in: Schooling, Experience, and Earnings, pages 1-4 National Bureau of Economic Research, Inc.
  7. Darity, William Jr & Guilkey, David & Winfrey, William, 1995. "Ethnicity, race, and earnings," Economics Letters, Elsevier, vol. 47(3-4), pages 401-408, March.
  8. Edin, Per-Anders & Richardson, Katarina, 2002. " Swimming with the Tide: Solidary Wage Policy and the Gender Earnings Gap," Scandinavian Journal of Economics, Wiley Blackwell, vol. 104(1), pages 49-67.
  9. Jeffrey M Wooldridge, 2010. "Econometric Analysis of Cross Section and Panel Data," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262232588, July.
  10. Fortin, Nicole & Lemieux, Thomas & Firpo, Sergio, 2011. "Decomposition Methods in Economics," Handbook of Labor Economics, Elsevier.
  11. Wooldridge, Jeffrey M, 1992. "Some Alternatives to the Box-Cox Regression Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 33(4), pages 935-955, November.
  12. Racine, Jeff & Li, Qi, 2004. "Nonparametric estimation of regression functions with both categorical and continuous data," Journal of Econometrics, Elsevier, vol. 119(1), pages 99-130, March.
  13. Ben Jann, 2008. "The Blinder–Oaxaca decomposition for linear regression models," Stata Journal, StataCorp LP, vol. 8(4), pages 453-479, December.
  14. 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.
  15. John M. Krieg & Paul Storer, 2006. "How Much Do Students Matter? Applying The Oaxaca Decomposition To Explain Determinants Of Adequate Yearly Progress," Contemporary Economic Policy, Western Economic Association International, vol. 24(4), pages 563-581, October.
  16. Terza, Joseph V., 1998. "Estimating count data models with endogenous switching: Sample selection and endogenous treatment effects," Journal of Econometrics, Elsevier, vol. 84(1), pages 129-154, May.
  17. Rothe, Christoph & Firpo, Sergio Pinheiro, 2013. "Semiparametric estimation and inference using doubly robust moment conditions," Textos para discussão 330, FGV/EESP - Escola de Economia de São Paulo, Getulio Vargas Foundation (Brazil).
  18. Dan Black & Amelia Haviland & Seth Sanders & Lowell Taylor, 2006. "Why Do Minority Men Earn Less? A Study of Wage Differentials among the Highly Educated," The Review of Economics and Statistics, MIT Press, vol. 88(2), pages 300-313, May.
  19. Jacob A. Mincer, 1974. "Schooling, Experience, and Earnings," NBER Books, National Bureau of Economic Research, Inc, number minc74-1.
  20. Ian A. Munn & Anwar Hussain, 2010. "Factors Determining Differences in Local Hunting Lease Rates: Insights from Blinder-Oaxaca Decomposition," Land Economics, University of Wisconsin Press, vol. 86(1), pages 66-78.
  21. Thomas Bauer & Silja Göhlmann & Mathias Sinning, 2007. "Gender differences in smoking behavior," Health Economics, John Wiley & Sons, Ltd., vol. 16(9), pages 895-909.
  22. J. M. C. Santos Silva & Silvana Tenreyro, 2006. "The Log of Gravity," The Review of Economics and Statistics, MIT Press, vol. 88(4), pages 641-658, November.
  23. Guido W. Imbens & Jeffrey M. Wooldridge, 2009. "Recent Developments in the Econometrics of Program Evaluation," Journal of Economic Literature, American Economic Association, vol. 47(1), pages 5-86, March.
  24. 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.
  25. Ronald L. Oaxaca & Michael R. Ransom, 1999. "Identification in Detailed Wage Decompositions," The Review of Economics and Statistics, MIT Press, vol. 81(1), pages 154-157, February.
  26. Steffen Mueller, 2012. "Works Councils and Establishment Productivity," ILR Review, Cornell University, ILR School, vol. 65(4), pages 880-898, October.
  27. Guido W. Imbens, 2004. "Nonparametric Estimation of Average Treatment Effects Under Exogeneity: A Review," The Review of Economics and Statistics, MIT Press, vol. 86(1), pages 4-29, February.
  28. Rothe, Christoph, 2012. "Decomposing the Composition Effect," IZA Discussion Papers 6397, Institute for the Study of Labor (IZA).
  29. Blackburn, McKinley L., 2007. "Estimating wage differentials without logarithms," Labour Economics, Elsevier, vol. 14(1), pages 73-98, January.
  30. Yun, Myeong-Su, 2004. "Decomposing differences in the first moment," Economics Letters, Elsevier, vol. 82(2), pages 275-280, February.
  31. Melly, Blaise, 2005. "Decomposition of differences in distribution using quantile regression," Labour Economics, Elsevier, vol. 12(4), pages 577-590, August.
  32. Boris Kaiser, 2015. "Detailed decompositions in nonlinear models," Applied Economics Letters, Taylor & Francis Journals, vol. 22(1), pages 25-29, January.
  33. Astrid Kunze, 2008. "Gender wage gap studies: consistency and decomposition," Empirical Economics, Springer, vol. 35(1), pages 63-76, August.
  34. Cotton, Jeremiah, 1988. "On the Decomposition of Wage Differentials," The Review of Economics and Statistics, MIT Press, vol. 70(2), pages 236-243, May.
  35. Wooldridge, Jeffrey M., 2007. "Inverse probability weighted estimation for general missing data problems," Journal of Econometrics, Elsevier, vol. 141(2), pages 1281-1301, December.
  36. Jacob A. Mincer, 1974. "Age and Experience Profiles of Earnings," NBER Chapters,in: Schooling, Experience, and Earnings, pages 64-82 National Bureau of Economic Research, Inc.
  37. Boris Kaiser, 2013. "Detailed Decompositions in Generalized Linear Models," Diskussionsschriften dp1309, Universitaet Bern, Departement Volkswirtschaft.
  38. Thomas Bauer & Mathias Sinning, 2008. "An extension of the Blinder–Oaxaca decomposition to nonlinear models," AStA Advances in Statistical Analysis, Springer;German Statistical Society, vol. 92(2), pages 197-206, May.
  39. José Mata & José A. F. Machado, 2005. "Counterfactual decomposition of changes in wage distributions using quantile regression," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 20(4), pages 445-465.
  40. David Neumark, 1988. "Employers' Discriminatory Behavior and the Estimation of Wage Discrimination," Journal of Human Resources, University of Wisconsin Press, vol. 23(3), pages 279-295.
  41. Chang Hwan Kim, 2010. "Decomposing the Change in the Wage Gap Between White and Black Men Over Time, 1980-2005: An Extension of the Blinder-Oaxaca Decomposition Method," Sociological Methods & Research, , vol. 38(4), pages 619-651, May.
  42. Manning, Willard G. & Mullahy, John, 2001. "Estimating log models: to transform or not to transform?," Journal of Health Economics, Elsevier, vol. 20(4), pages 461-494, July.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:ube:dpvwib:dp1308. 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: (Silvia Glusstein-Gerber)

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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.