Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/33195
Authors: 
Fairlie, Robert W.
Year of Publication: 
2006
Series/Report no.: 
IZA Discussion Papers 1917
Abstract: 
The Blinder-Oaxaca decomposition technique is widely used to identify and quantify the separate contributions of group differences in measurable characteristics, such as education, experience, marital status, and geographical differences to racial and gender gaps in outcomes. The technique cannot be used directly, however, if the outcome is binary and the coefficients are from a logit or probit model. I describe a relatively simple method of performing a decomposition that uses estimates from a logit or probit model. Expanding on the original application of the technique in Fairlie (1999), I provide a more thorough discussion of how to apply the technique, an analysis of the sensitivity of the decomposition estimates to different parameters, and the calculation of standard errors. I also compare the estimates to Blinder-Oaxaca decomposition estimates and discuss an example of when the Blinder-Oaxaca technique may be problematic.
Subjects: 
decomposition
logit
probit
Blinder-Oaxaca decomposition
race
gender
JEL: 
C6
J15
J16
Document Type: 
Working Paper

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