Decomposing Differences in Arithmetic Means: A Doubly-Robust Estimation Approach

Kaiser, Boris (October 2013). Decomposing Differences in Arithmetic Means: A Doubly-Robust Estimation Approach (Discussion Papers 13-08). Bern: Department of Economics

[img]
Preview
Text
dp1308.pdf - Published Version
Available under License Creative Commons: Attribution (CC-BY).

Download (258kB) | Preview

When decomposing differences in average economic outcome between two groups of individuals, it is common practice to base the analysis on logarithms if the dependent variable is nonnegative. This paper argues that this approach raises a number of undesired statistical and conceptual issues because decomposition terms have the interpretation of approximate percentage differences in geometric means. Instead, we suggest that the analysis should be based on the arithmetic means of the original dependent variable. We present a flexible parametric decomposition framework that can be used for all types of continuous (or count) nonnegative dependent variables. In particular, we derive a propensity-score-weighted estimator for the aggregate decomposition that is “doubly robust”, that is, consistent under two separate sets of assumptions. A comparative Monte Carlo study illustrates that the proposed estimator performs well in a many situations. An application to the union wage gap in the United States finds that the importance of the unexplained union wage premium is much smaller than suggested by the standard log-wage decomposition.

Item Type:

Working Paper

Division/Institute:

03 Faculty of Business, Economics and Social Sciences > Department of Economics

UniBE Contributor:

Kaiser, Boris

Subjects:

300 Social sciences, sociology & anthropology > 330 Economics

Series:

Discussion Papers

Publisher:

Department of Economics

Language:

English

Submitter:

Lars Tschannen

Date Deposited:

28 Oct 2020 17:07

Last Modified:

28 Oct 2020 17:07

JEL Classification:

C10, C50, C51, J31

BORIS DOI:

10.7892/boris.145771

URI:

https://boris.unibe.ch/id/eprint/145771

Actions (login required)

Edit item Edit item
Provide Feedback