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Additive Decompositions with Interaction Effects

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  • Biewen, Martin

    (University of Tuebingen)

Abstract

This paper proposes a comprehensive, path-independent decomposition formula of changes into ceteris paribus effects and interaction effects. The formula implies a reassessment of sequential decomposition methods that are widely used in the literature and that are restrictive in how they treat interaction effects. If counterfactual outcomes are correctly specified, it may also be viewed as a description of certain aspects of causality in the situation where more than one causal influence is present.

Suggested Citation

  • Biewen, Martin, 2012. "Additive Decompositions with Interaction Effects," IZA Discussion Papers 6730, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp6730
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    References listed on IDEAS

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    3. MAZEIKAITE Gintare & O'DONOGHUE Cathal & SOLOGON Denisa, 2017. "Decomposing health inequality in the EU," LISER Working Paper Series 2017-02, Luxembourg Institute of Socio-Economic Research (LISER).
    4. Naszódi, Anna, 2022. "Hogyan szálazzuk szét a megfigyelhető változások okait? [Decomposing observable changes into their causes]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(11), pages 1407-1432.
    5. Castro, Juan F. & Rolleston, Caine, 2018. "The contribution of early childhood and schools to cognitive gaps: New evidence from Peru," Economics of Education Review, Elsevier, vol. 64(C), pages 144-164.
    6. Gero Junike & Hauke Stier & Marcus C. Christiansen, 2022. "Profit and loss decomposition in continuous time and approximations," Papers 2212.06733, arXiv.org, revised Dec 2024.
    7. Christina Boll & Julian Sebastian Leppin, 2016. "Differential Overeducation in East and West Germany: Extending Frank's Theory on Economic Returns Changes the Picture of Disadvantaged Women," LABOUR, CEIS, vol. 30(4), pages 455-504, December.
    8. Farzana Afridi & Taryn Dinkelman & Kanika Mahajan, 2018. "Why are fewer married women joining the work force in rural India? A decomposition analysis over two decades," Journal of Population Economics, Springer;European Society for Population Economics, vol. 31(3), pages 783-818, July.
    9. Juan F. Castro, 2015. "Linear decompositions of cognitive achievement gaps a cautionary note and an illustration using peruvian data," Working Papers 15-08, Centro de Investigación, Universidad del Pacífico.
    10. Anna Naszodi, 2021. "Decomposition scheme matters more than you may think," Papers 2104.09141, arXiv.org.
    11. Gintare Mazeikaite & Cathal O’Donoghue & Denisa M. Sologon, 2021. "What Drives Cross-Country Health Inequality in the EU? Unpacking the Role of Socio-economic Factors," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 155(1), pages 117-155, May.

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    More about this item

    Keywords

    Oaxaca-Blinder decomposition; interaction effects; ceteris paribus effects;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J71 - Labor and Demographic Economics - - Labor Discrimination - - - Hiring and Firing
    • C02 - Mathematical and Quantitative Methods - - General - - - Mathematical Economics
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution

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