An Extension of the Blinder-Oaxaca Decomposition Technique to Logit and Probit Models

Robert Fairlie

Santa Cruz Department of Economics, Working Paper Series from Department of Economics, UC Santa Cruz

Abstract: The Blinder-Oaxaca decomposition technique is widely used to identify and quantify the separate contributions of group differences in measurable characteristics, such as education, experience, marital status, and geographical differences to racial and gender gaps in outcomes especially wage, earnings and other labor market outcomes. The technique cannot be used directly, however, if the outcome is binary and the coefficients are from a logit or probit model. I describe a relatively simple method of performing a decomposition that uses estimates from a logit or probit model. Expanding on the original application of the technique in Fairlie (1999), I provide a more thorough discussion of how to apply the technique, an analysis of the sensitivity of the decomposition estimates to different parameters, and the calculation of standard errors. I also compare the estimates to Blinder-Oaxaca decomposition estimates and discuss an example of when the Blinder-Oaxaca technique may be problematic. Applicaiton to computer ownership and entrepreneurship are used to illustrate the technique.

Keywords: Social and Behavioral Sciences; decomposition; race; inequality; computer; ICT; entrepreneurship; labor; education (search for similar items in EconPapers)
Date: 2014-09-12
New Economics Papers: this item is included in nep-dcm and nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://www.escholarship.org/uc/item/7j86n5q3.pdf;origin=repeccitec (application/pdf)

Related works:
Working Paper: An Extension of the Blinder-Oaxaca Decomposition Technique to Logit and Probit Models (2014)
Working Paper: An Extension of the Blinder-Oaxaca Decomposition Technique to Logit and Probit Models (2006)
Working Paper: An Extension of the Blinder-Oaxaca Decomposition Technique to Logit and Probit Models (2003)
Working Paper: An Extension of the Blinder-Oaxaca Decomposition Technique to Logit and Probit Models (2003)
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:cdl:ucscec:qt7j86n5q3

Access Statistics for this paper

More papers in Santa Cruz Department of Economics, Working Paper Series from Department of Economics, UC Santa Cruz Contact information at EDIRC.
Bibliographic data for series maintained by Lisa Schiff ().