Unexplained Gaps and Oaxaca-Blinder Decompositions

We analyze four methods to measure unexplained gaps in mean outcomes: three decompositions based on the seminal work of Oaxaca (1973) and Blinder (1973) and an approach involving a seemingly naïve regression that includes a group indicator variable. Our analysis yields two principal findings. We show that the coefficient on a group indicator variable from an OLS regression is an attractive approach for obtaining a single measure of the unexplained gap. We also show that a commonly-used pooling decomposition systematically overstates the contribution of observable characteristics to mean outcome differences when compared to OLS regression, therefore understating unexplained differences. We then provide three empirical examples that explore the practical importance of our analytic results.discrimination, decompositions

Compensating Differentials and Self-selection: An Application to Lawyers.

This paper models individual choice between two types of jobs as dependent on the difference i n potential earnings and on preferences for nonpecuniary compensation. The model leads to simultaneous estimation of earnings and job choice functions in a manner that takes account of self-selection of individuals into the sector of highest utility. An application to lawyers choosing between private and "public-interest" law casts doubt on the notion that public-interest lawyers are accepting substantially lower earnings by virtue of their choice-an impression derived from es timation of earnings functions without accounting for self-selection. The estimation technique also takes proper account of the "'choice-based" nature of the sample. Copyright 1988 by University of Chicago Press.

First, Do No Harm: Welfare Gains and Welfare Losses from Environmental Taxation

We clarify the relationship between the “double dividend” (associated with a marginal change from the existing tax system) and the situation in which the optimal environmental tax rate is greater than the Pigouvian tax rate. These two situations are generated by rather similar combinations of parameters. We also show that, if environmental taxes are increased beyond their second-best optimal level, there is a rapid increase in the non-environmental costs of tax distortions. Our calculations suggest that, for typical parameter combinations, there will be overall welfare losses when the tax rate is increased to somewhat more than twice the optimal level

Improving Access to Health Care: What Can the States Do?

This book features a dozen essays addressing access to health care.health care, access, states

Unexplained gaps and Oaxaca-Blinder decompositions

We analyze four methods to measure unexplained gaps in mean outcomes: three decompositions based on the seminal work of Oaxaca (1973) and Blinder (1973) and an approach involving a seemingly naïve regression that includes a group indicator variable. Ou

Unexplained gaps and Oaxaca-Blinder decompositions

We analyze four methods to measure unexplained gaps in mean outcomes: three decompositions based on the seminal work of Oaxaca (1973) and Blinder (1973) and an approach involving a seemingly naïve regression that includes a group indicator variable. Our analysis yields two principal findings. We show that the coefficient on a group indicator variable from an OLS regression is an attractive approach for obtaining a single measure of the unexplained gap. We also show that a commonly-used pooling decomposition systematically overstates the contribution of observable characteristics to mean outcome differences when compared to OLS regression, therefore understating unexplained differences. We then provide three empirical examples that explore the practical importance of our analytic results.Decompositions Discrimination