Normalized Equation and Decomposition Analysis: Computation and Inference

Myeong-Su Yun ()

No 1822, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This paper joins discussions on normalized regression and decomposition equations in devising a simple and general algorithm for obtaining the normalized regression and applying it to the Oaxaca decomposition. This resolves the invariance problem in the detailed Oaxaca decomposition. An algorithm to calculate an asymptotic covariance matrix for estimates in the normalized regression for hypothesis testing is also derived. We extend these algorithms to non-linear equations where the underlying equation is linear and decompose differences in the first moment.

Keywords: normalized regression; detailed decomposition; invariance; identification; characteristics effect; coefficients effect (search for similar items in EconPapers)
JEL-codes: C20 J70 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2005-10
New Economics Papers: this item is included in nep-ecm
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Citations: View citations in EconPapers (13)

Published - revised version published in: Journal of Economic and Social Measurement, 2008, 33 (1), 27-38

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