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Title:Decomposition Analysis for a Binary Choice Model PDF Logo
Authors:Yun, Myeong-Su
Issue Date:2000
Series/Report no.:IZA Discussion paper series 145
Abstract:This paper introduces a new and simple decomposition method for a binary choice model that is equivalent to the Blinder-Oaxaca decomposition analysis for wage differentials. The decomposition method is first developed for a single probit model and later generalized to a simultaneous equations model. Using Taylor expansion, we approximate the differences in the probabilities of choosing option 1 over option 0 between two groups in order to find the effects of the differences in ?each? individual characteristic and the differences in ?each? coefficient. We implement this decomposition analysis studying the racial gap in female labor market participation rates. The racial gap of participation rates among women can be almost exclusively explained by the differences in the coefficients.
Subjects:Decomposition analysis
binary choice
probit
selection bias
maximum likelihood estimation
labor market participation
JEL:J21
C25
C35
Document Type:Working Paper
Appears in Collections:IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)

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