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st: RE: significance of grouped contributions in Oaxaca decomposition

From   "Ben Jann" <[email protected]>
To   <[email protected]>
Subject   st: RE: significance of grouped contributions in Oaxaca decomposition
Date   Fri, 9 Jun 2006 23:48:20 +0200

Ellen Van de Poel wrote:
>  I use the command : oaxaca group1 group2, de esave
>  to generate detailed Oaxaca decomposition results.
>  Thereafter I want to group the contributions of some binary variables
>  that result from a categorical one. E.g. I want to group
>  from all the (binary) income quintiles to get a general contribution
> for income.
>  To get the statistal significance of this grouped contribution I use
>  the command :
>  nlcom (wealthcon:
> _b[quintile1]+_b[quintile2]+_b[quintile3]+_b[qquintile4])
>  Now, the problem is that this only works for the "endowments
>  contribution". Through the _b[] command I cannot seem to get the
>  contributions from the coefficient and interaction effects.

There are two issues:

First, and most important, -nlcom- will not produce correct results
concerning "statistal significance" in any case. Here is the description

of the -esave- option from the -oaxaca- help file:

esave specifies that the results be returnd in e(). This is useful,
     e.g., if you want to use -bootstrap- with oaxaca. Note that the
     off-diagonal elements in e(V) will be set to zero since oaxaca does
     not provide the covariances among the various decomposition
     components. Do not apply -lincom- or similar techniques to the
     returned results.  Also do not use -predict-.

Clearly, -nlcom- is one of these "similar techniques". The reason why 
-nlcom- or -lincom- do not compute correct results is that -oaxaca- 
just sets all covariances in e(V) to zero. This, in fact, is also the 
reason why -oaxaca- does not return its results in e() by default. I 
just added the -esave- option to facilitate tasks such as 

The correct way to compute combined effects is to group variables 
using the detail option. For example, Ellen could type

 . oaxaca group1 group2, detail(quintile=quintile*)

The contributions of all the quintile variables would then be combined
internally and the correct standard error will be reported.

Second, the results stored by -oaxaca- in e(b) and e(V) are organized
in several "equations". For example, -oaxaca group1 group2, de esave-
will save three equations: "endowments", "coefficients", and 
"interaction". Ellen can access the the results for the different 
equations as follows:

 endowments equation: _b[quintile1] or [endowments]_b[quintile1]
 coefficients equation: [coefficients]_b[quintile1]
 interaction equation: [interaction]_b[quintile1]


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