Economics at your fingertips  

Reference parameters in Blinder-Oaxaca decomposition: Pooled-sample versus intercept-shift approaches

Myoung-jae Lee

The Journal of Economic Inequality, 2015, vol. 13, issue 1, 69-82

Abstract: The Blinder-Oaxaca (BO) decomposition explains two groups’ difference (e.g., in wage between males and females) with regressors. The BO decomposition depends on the chosen counterfactual reference parameter representing no “discrimination”. One popular way to choose the reference parameter is simply using the pooled sample, and another way is allowing different intercepts in the pooled sample. This paper points out two problems in the latter. First, the reference slopes are a matrix-weighted average of the two group slopes where the weights depend only on the variances of the two groups, not on the levels; the levels may represent the competing “forces” to primarily influence the reference parameter, but the role of the variances should be secondary at best. Second, the reference intercept is arbitrary: the same BO decomposition holds with vastly different reference intercepts. Copyright Springer Science+Business Media New York 2015

Keywords: Blinder-Oaxaca decomposition; Reference parameter; Wage gap (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3) Track citations by RSS feed

Downloads: (external link) (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Ordering information: This journal article can be ordered from
http://www.springer. ... th/journal/10888/PS2

DOI: 10.1007/s10888-014-9293-8

Access Statistics for this article

The Journal of Economic Inequality is currently edited by Stephen Jenkins

More articles in The Journal of Economic Inequality from Springer, Society for the Study of Economic Inequality Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla ().

Page updated 2020-07-05
Handle: RePEc:kap:jecinq:v:13:y:2015:i:1:p:69-82