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Decomposing Wage Distributions Using Recentered Influence Function Regressions

Sergio Firpo, Nicole M. Fortin () and Thomas Lemieux ()
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Nicole M. Fortin: Vancouver School of Economics, University of British Columbia, 6000 Iona Drive, Vancouver, BC V6T 1L4, Canada

Econometrics, 2018, vol. 6, issue 2, 1-40

Abstract: This paper provides a detailed exposition of an extension of the Oaxaca-Blinder decomposition method that can be applied to various distributional measures. The two-stage procedure first divides distributional changes into a wage structure effect and a composition effect using a reweighting method. Second, the two components are further divided into the contribution of each explanatory variable using recentered influence function (RIF) regressions. We illustrate the practical aspects of the procedure by analyzing how the polarization of U.S. male wages between the late 1980s and the mid 2010s was affected by factors such as de-unionization, education, occupations, and industry changes.

Keywords: decomposition methods; RIF-regressions; wage inequality (search for similar items in EconPapers)
JEL-codes: B23 C C00 C01 C1 C2 C3 C4 C5 C8 (search for similar items in EconPapers)
Date: 2018
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