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Re: st: [questions on -heckman- and income decomposition]

From   "Jann, Ben" <>
To   <>
Subject   Re: st: [questions on -heckman- and income decomposition]
Date   Thu, 30 Sep 2004 15:42:32 +0200

Two days ago there has been a query about standard 
errors for the components of the (Oaxaca/Blinder) 
decomposition of wage differentials. Stas answered:

> As long as all those decompositions are linear functions of the
> coefficients (as far as I can recall), you can get the standard errors
> from -lincom- command, although you would have to do all of the
> algebra from scratch. If there are any non-linearities involved, the
> goal can be achieved with -nlcom- instead.

There are two problems with -lincom- or -nlcom-. Firstly, 
the decomposition of wage differentials is usually 
preformed using two sets of estimates (e.g. for male
and for female), but -lincom/nlcom- can only be applied 
to one set of estimates (there might be a trick, however, 
to overcome this problem). 

Secondly and more seriously, the standard errors 
computed by -lincom- and -nlcom- would only be valid, 
if the regressors are fixed (this is also true for the 
formulas in Oaxaca/Ransom 1994), because the means of 
the regressors, which have nonzero variance in the case 
of stochastic regressors, are used in the decomposition. 
I recently wrote down some formulas to take into account 
stochastic regressors. Unfortunately, the new version
of -decompose-, which computes these standard errors 
(as well as the standard errors for the case of fixed
regressors) is not finished yet. People interested in 
the formulas and the beta-version of the program should 
contact me offlist.

This brings me to the next point: Stas complained that
"decompose" is not a good name for this package. I will 
be happy to use another name for the new version if 
anyone makes a good suggestion.

Cheers, ben 

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