Decomposing differences in arithmetic means: a doubly robust estimation approach

Boris Kaiser

Empirical Economics, 2016, vol. 50, issue 3, No 8, 873-899

Abstract: Abstract When decomposing differences in average economic outcomes 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 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 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 many situations. An application to the union wage gap in the USA finds that the importance of the unexplained union wage premium is much smaller than suggested by the standard log-wage decomposition.

Keywords: Oaxaca–Blinder; Decomposition methods; Log-wage decompositions; Doubly robust estimation; Arithmetic and geometric means; Inverse probability weighting (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://link.springer.com/10.1007/s00181-015-0946-7 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

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: https://EconPapers.repec.org/RePEc:spr:empeco:v:50:y:2016:i:3:d:10.1007_s00181-015-0946-7

Ordering information: This journal article can be ordered from
http://www.springer. ... rics/journal/181/PS2

DOI: 10.1007/s00181-015-0946-7

Access Statistics for this article

Empirical Economics is currently edited by Robert M. Kunst, Arthur H.O. van Soest, Bertrand Candelon, Subal C. Kumbhakar and Joakim Westerlund

More articles in Empirical Economics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().