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Title:A Simple Solution to the Identification Problem in Detailed Wage Decompositions PDF Logo
Authors:Yun, Myeong-Su
Issue Date:2003
Series/Report no.:IZA Discussion paper series 836
Abstract:Oaxaca and Ransom (1999) show that a detailed decomposition of the coefficients effect is destined to suffer from an identification problem since the detailed coefficients effect attributed to a dummy variable is not invariant to the choice of reference groups. It turns out that the identification problem in the decomposition equation is a disguised identification problem of constant and dummy variables in a regression equation. This paper proposes a simple and natural remedy for this problem by utilizing ?normalized? regressions which enable us to identify the constant and estimates of each dummy variable. The identification problem is automatically resolved once we obtain ?normalized? regression equations for two comparison groups.
Subjects:detailed decomposition
invariance
identification
characteristics effect
coefficients effect
normalized regression
JEL:J70
C20
Document Type:Working Paper
Appears in Collections:IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)

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