Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/33273
Authors: 
Heitmüller, Axel
Year of Publication: 
2005
Series/Report no.: 
IZA Discussion Papers 1886
Abstract: 
Though theoretically appealing and very popular amongst labour economists, the interpretation of the unexplained part of the Oaxaca (1973) decomposition as discrimination rather than an omitted variable problem in cross-section data has often been criticised. In this note it is shown that this problem extends also to panel data and moreover that in a fixed effects model including time invariant regressors omitted variables are a necessary and deliberate consequence. Monte Carlo simulation is used to show the extent of the bias. Special cases and practical implications are discussed.
Subjects: 
decomposition
fixed effects
Monte Carlo study
JEL: 
C1
C33
Document Type: 
Working Paper

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