Handbook of Labor Economics, Vol. 4, No. Suppl PA, 2011

ISSN: 1573-4463

doi: 10.1016/S0169-7218(11)00407-2

Chapter 1Decomposition Methods in Economics

Nicole Fortin*, Thomas Lemieux**, Sergio Firpo***

* UBC and CIFAR

** UBC and NBER

*** EESP-FGV and IZA

Abstract

This chapter provides a comprehensive overview of decomposition methods that have been developed since the seminal work of Oaxaca and Blinder in the early 1970s. These methods are used to decompose the difference in a distributional statistic between two groups, or its change over time, into various explanatory factors. While the original work of Oaxaca and Blinder considered the case of the mean, our main focus is on other distributional statistics besides the mean, such as quantiles, ...

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