On the Sensitivity of Wage Gap Decompositions

Martin Huber and Anna Solovyeva ()
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Anna Solovyeva: NORC at the University of Chicago

Journal of Labor Research, 2020, vol. 41, issue 1, No 1, 33 pages

Abstract: Abstract This paper investigates the sensitivity of average wage gap decompositions to methods resting on different assumptions regarding endogeneity of observed characteristics, sample selection into employment, and estimators’ functional form. Applying five distinct decomposition techniques to estimate the gender wage gap in the U.S. using data from the National Longitudinal Survey of Youth 1979, we find that the magnitudes of the wage gap components are generally not stable across methods. Furthermore, the definition of the observed characteristics matters: merely including their current values (as frequently seen in wage decompositions) entails smaller explained and larger unexplained components than when including both their current values and histories in the analysis. Given the sensitivity of our results, we advise caution when using wage decompositions for policy recommendations.

Keywords: Wage decomposition; Gender wage gap; Causal mechanisms; Mediation (search for similar items in EconPapers)
JEL-codes: C14 C21 J31 J71 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (3)

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Working Paper: On the sensitivity of wage gap decompositions (2018)
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DOI: 10.1007/s12122-020-09302-7

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