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Non-Linear Decomposition Materials
Original
Application: Fairlie, Robert W. 1999. "The Absence of the African-American
Owned Business: An Analysis of the Dynamics of Self-Employment," Journal
of Labor Economics, 17(1): 80-108. PDF
Revised
to randomly match black/white distributions in: Fairlie, Robert W., and Alicia
M. Robb. 2007. "Why are Black-Owned Businesses Less Successful than
White-Owned Businesses: The Role of Families, Inheritances, and Business Human
Capital," Journal of Labor Economics,
25(2): 289-323. PDF
Revised
to randomize variable ordering and incorporate sample weights if needed as
discussed in:
Fairlie,
Robert W. 2017. "Addressing Path Dependence and Incorporating Sample
Weights in the Nonlinear Blinder-Oaxaca Decomposition Technique for Logit, Probit and Other Nonlinear Models," Stanford
University (SIEPR) WP
Example Decomposition Programs for SAS
New Versions that Address Path Dependence and Incorporate Sample Weights
decompexample_v7.sas – Original Method
of Specifying Order of Variables
decompexamplerandom_v7.sas –
Randomized Ordering of Variables to Address Path Dependence
Earlier
Versions
decompexample_v6.sas - Full Version with
Standard Errors
decompexamplenose_v6.sas - Simplified
Version without Standard Errors
Dataset for
Example Programs - SAS
Dataset for Example Programs - Stata
Dataset for Example Programs - CSV
Stata Program for Logit or Probit
code written by Ben Jann, ETH Zurich (Swiss Federal Institute of Technology)
In Stata, the program can be installed by
typing the following in the command line:
ssc install fairlie
If the program already exists and you want to update it then type:
ssc install fairlie,
replace
For help and examples on how to use the program type:
ssc help fairlie
Examples for Using Stata Procedure
1. White-Black Decomposition
using Coefficients from Pooled Sample of All Races
generate
black2 = black==1 if white==1|black==1
fairlie homecomp female age college (region:midwest
south west), by(black2) pooled (black latino asian natamer)
Notes: (1) A pooled
regression including all racial groups is used to estimate the parameters
(which reflects the full market instead of the parameters for only a specific
racial group). The full set of race dummies needs to be listed in the command.
(2) The black2 dummy is created to define the two comparison groups (black2=0
for whites and black2=1 for blacks). (3) The independent contributions from
each region dummy cannot be estimated and thus must be estimated as a group
(which is defined in the code).
2. White-Black Decomposition
using Coefficients from White Sample
fairlie homecomp female age college (region:midwest
south west) if white==1|black==1, by(black)
Notes: (1) Only white
observations (i.e. black=0) are used to estimate the parameters. (2) The black
dummy and selecting the sample to only include whites and blacks defines the
two comparison groups (black=0 for whites, and black=1 for blacks). (3) The
independent contributions from each region dummy cannot be estimated and thus
must be estimated as a group (which is defined in the code above).
3. Male-Female Decomposition
using Coefficients from Pooled Sample of Men and Women
fairlie homecomp black latino asian natamer age college (region:midwest south west), by(female) pooled (female)
Notes: (1) A pooled
regression including both men and women is used to estimate the parameters
(which reflects the full market instead of the parameters for only one gender).
The female dummy needs to be listed in the command. (2) The female dummy defines
the two comparison groups (female=0 for men and female=1 for women). (3) The
independent contributions from each region dummy cannot be estimated and thus
must be estimated as a group (which is defined in the code).
4. Male-Female Decomposition
using Coefficients from Pooled Sample of Men and Women with Random Ordering of
Variables and More Replications
fairlie homecomp black latino Asian natamer age college (region:midwest
south west), by(female) pooled (female) ro reps(1000)
Notes: (1) A pooled regression
including both men and women is used to estimate the parameters (which reflects
the full market instead of the parameters for only one gender). The female
dummy needs to be listed in the command. (2) The female dummy defines the two
comparison groups (female=0 for men and female=1 for women). (3) The
independent contributions from each region dummy cannot be estimated and thus
must be estimated as a group (which is defined in the code). (4) The variables
are ordered randomly in each replication so that contribution estimates are not
sensitive to ordering of variables in regression statement. (5) The number of
replications is 1000 instead of the default number of replications of 100.