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| Title: | | A note on decompositions in fixed effects models in the presence of time-invariant characteristics  |
| Authors: | | Heitmüller, Axel |
| Issue Date: | | 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 |
| Appears in Collections: | | IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)
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