On the sensitivity of wage gap decompositions

Martin Huber and Anna Solovyeva

No 497, FSES Working Papers from Faculty of Economics and Social Sciences, University of Freiburg/Fribourg Switzerland

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 levels (as frequently seen in wage decompositions) entails smaller explained and larger unexplained components than when including both their levels 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)
Pages: 30 pages
Date: 2018-10-22
New Economics Papers: this item is included in nep-gen and nep-ore
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Citations: View citations in EconPapers (4)

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Related works:
Journal Article: On the Sensitivity of Wage Gap Decompositions (2020)
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