Ronald L Oaxaca

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Journals/Publications

• Shatnawi, D., Oaxaca, R., & Ransom, M. (2013). Movin' on up: Hierarchical occupational segmentation and gender wage gaps. Journal of Economic Inequality, 1-24.
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  Abstract: Our study evaluates and extends existing wage decomposition methodologies that seek to measure the contributions of endowments, pure wage discrimination, and job segregation. We employ data from a regional supermarket that faced a Title VII class-action lawsuit to examine how standard wage specifications integrated with a model of hierarchical segregation might perform in wage decompositions. Our results show that a common misspecification of the wage structure leads to false inferences about the presence of pure wage discrimination. We demonstrate the generalizability of our methodology using CPS data. © 2013 © Springer Science+Business Media New York (outside the USA).
• Sorensen, T., Sarnikar, S., & Oaxaca, R. L. (2012). Race and gender differences under federal sentencing guidelines. American Economic Review, 102(3), 256-260.
• Shatnawi, D., Oaxaca, R., & Ransom, M. (2011). Applying fixed effects to hierarchical segregation models. American Economic Review, 101(3), 588-592.
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  Abstract: This paper expands the empirical implementation of hierarchical segregation models to allow for the use of panel methods. We use firm level data collected between 1977 and 1985 from a regional grocery store that faced a title VII class-action lawsuit over gender discrimination much the same as Wal-Mart and Costco. Special problems arise in implementing decompositions in a fixed effects and random effects setting, especially when analyzing wage-level differences. We develop a variation of wage decompositions that takes into consideration an unbalanced design and extends the literature by explicitly formalizing the inclusion of the unobserved heterogeneous effects. © 2011 AEA. The American Economic Association is hosted by Vanderbilt University.
• Ransom, M. R., & Oaxaca, R. L. (2010). New market power models and sex differences in pay. Journal of Labor Economics, 28(2), 267-289.
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  Abstract: In the context of certain models, it is possible to infer the elasticity of labor supply to the firm from the elasticity of the quit rate with respect to the wage. We use this strategy to estimate the elasticity of labor supply for men and women workers at a chain of grocery stores, identifying separation elasticities from differences in wages and separation rates across different job titles within the firm. We estimate that women have lower elasticities, so a Robinson-style monopsony model can explain reasonably well the lower relative pay of women in the retail grocery industry. © 2010 by The University of Chicago. All rights reserved.
• Regan, T. L., & Oaxaca, R. L. (2009). Work experience as a source of specification error in earnings models: Implications for gender wage decompositions. Journal of Population Economics, 22(2), 463-499.
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  Abstract: This paper models the bias from using potential vs actual experience in log wage models. The nature of the problem is best viewed as specification error as opposed to classical errors-in-variables. We correct for the discrepancy between potential and actual work experience and create a predicted measure of work experience. We use the 1979 National Longitudinal Survey of Youth and the Panel Study of Income Dynamics and extend our findings to the Integrated Public Use Microdata Sample. Our results suggest that potential experience biases the effects of schooling and the rates of return to labor market experience. Using such a measure in earnings models underestimates the explained portion of the male-female wage gap. We are able to separately identify the decomposition biases associated with incorrect experience measures and biased parameter estimates. © 2007 Springer-Verlag.
• Cox, J. C., & Oaxaca, R. L. (2008). Chapter 114 Experimetrics: The Use of Market Experiments to Evaluate the Performance of Econometric Estimators. Handbook of Experimental Economics Results, 1(C), 1078-1086.
• Cox, J. C., & Oaxaca, R. L. (2008). Chapter 36 Laboratory Tests of Job Search Models. Handbook of Experimental Economics Results, 1(C), 311-318.
• Deblasi, M., & Oaxaca, R. L. (2007). Amarican Economic Review: Editors' introduction. American Economic Review, 97(2), viii.
• Lang, G. E., London, S., Monks, J., Oaxaca, R. L., Romano, R., Ehrenberg, R. G., & Thornton, S. (2007). Financial inequality in higher education the annual report on the economic status of the profession, 2006-07. Academe, 93(2), 21-50.
• Oaxaca, R. L. (2007). The challenge of measuring labor market discrimination against women. Swedish Economic Policy Review, 14(1), 199-231.
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  Abstract: This paper is an essay on the challenges that arise when attempting to quantify the extent of labor market discrimination against women. Three major economic theories of labor market discrimination are discussed: tastes and preferences, market power, and statistical discrimination. Decomposition methodology is presented and critiqued. Issues associated with attempts to use decomposition methodology to correct gender salary inequities in the work place are carefully examined.
• Regan, T. L., Oaxaca, R. L., & Burghardt, G. (2007). A human capital model of the effects of ability and family background on optimal schooling levels. Economic Inquiry, 45(4), 721-738.
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  Abstract: This paper develops a theoretical model of optimal schooling levels where ability and family background are the central explanatory variables. We derive schooling demand and supply functions based on individual wealth maximization. Using the National Longitudinal Survey of Youth 1979 data, we stratify our sample into 1-yr full-time equivalent (FTE) work experience cohorts for 1985-1989. The estimated Mincerian "overtaking" cohort (the years of work experience at which individuals' observed earnings approximately equal what they would have been based on schooling and ability alone) corresponds to 13 FTE years of experience, yielding on average a rate of return of 10.3% and an average (optimal) 11.4 yr of schooling. (JEL J24, J31, J22) © 2007 Western Economic Association International.
• DeBlasi, M., & Oaxaca, R. L. (2006). American Economic Review: Editors' Introduction. American Economic Review, 96(2), vii.
• Gupta, N. D., Oaxaca, R. L., & Smith, N. (2006). Analysing trends in US and Danish gender wage gaps in the 1980s and 1990s. Applied Economics Letters, 13(10), 643-647.
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  Abstract: Trends in US and Danish gender wage gaps in the 1980s and 1990s are analysed within the framework of simple auto-regressive time-series models. Results show a saturation effect in the wage progress of women in Denmark at a level of 85% but no similar signs of stabilization in the USA. Also, no evidence is found that business cycle variables can explain the development of the gender wage gap in either country during this time period.
• Gupta, N. D., Oaxaca, R. L., & Smith, N. (2006). Swimming upstream, floating downstream: Comparing women's relative wage progress in the United States and Denmark. Industrial and Labor Relations Review, 59(2), 243-266.
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  Abstract: Applying a new decomposition method to U.S. PSID and Danish Longitudinal Sample data, the authors compare how U.S. and Danish gender wage gaps developed between 1983 and 1995. In Denmark, they find, the wage gap widened, because the worsening in women's relative returns to observable human capital attributes, as well as in their ranking relative to men in unobservable productive attributes, more than offset their wage gains from improved observable qualifications relative to men's. In the United States, in contrast, the gender convergence in qualifications offset adverse influences, including increasing wage dispersion throughout the labor market, to result in a narrowing of the gap. The largest increase in the gap in Denmark was experienced by women in the top earnings decile, and the largest decline in the gap in the United States affected those at the top and in the middle of the distribution. © by Cornell University.
• Horrace, W. C., & Oaxaca, R. L. (2006). Results on the bias and inconsistency of ordinary least squares for the linear probability model. Economics Letters, 90(3), 321-327.
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  Abstract: This note formalizes bias and inconsistency results for ordinary least squares (OLS) on the linear probability model and provides sufficient conditions for unbiasedness and consistency to hold. The conditions suggest that a "trimming estimator" may reduce OLS bias. © 2005 B.V. All rights reserved.
• Neuman, S., & Oaxaca, R. L. (2005). Wage differentials in the 1990s in Israel: Endowments, discrimination, and selectivity. International Journal of Manpower, 26(3), 217-236.
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  Abstract: Purpose - To examine gender and ethnic wage structures and wage differentials an Israel and decompose the difference in wages into endowments, discrimination and selectivity components. Design/methodology/approach - Selection and wage equations are estimated for each of the population groups (Eastern women, Western women, Eastern men, Western men) separately. The wage equations are corrected for selectivity using the Heckman procedure and subsequently wage differentials are decomposed into the three components mentioned above, using four alternative decompositions suggested in 2004 by Neuman and Oaxaca. Findings - Gender wage differentials are significantly larger than ethnic differences. Discrimination is more common between the genders. The four alternative decompositions - that are based on different assumptions and objectives - yield different results. Research limitations/implications - Decomposition of wage differences between groups needs to take into account information on the local relevant labor market and the wage setting process. Practical implications - Information on the relative shares of the endowments, discrimination and selectivity components leads to a more effective way to close wage gaps. Originality/value - Employment of new proposed decomposition methodologies that might lead to practical implications to combat gender and ethnic wage gaps in Israel. © Emerald Group Publishing Limited.
• Ransom, M., & Oaxaca, R. L. (2005). Intrafirm mobility and sex differences in pay. Industrial and Labor Relations Review, 58(2), 219-237.
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  Abstract: The authors analyze eleven years of employment data for a regional grocery store chain in the United States that faced a class-action lawsuit over gender discrimination. The data include all employees' job titles, wage rates, and earnings, allowing an examination of initial job assignments, mobility between departments, and mobility into supervisory and management positions. An analysis that models the flows of individuals between different departments and jobs within the firm as a Markov process shows a pattern of intrafirm mobility and initial job assignment that generally penalized women, even when the analysis accounts for individuals' characteristics. Although the court-mandated affirmative action remedies were not formally implemented until after the period of the study, there were clear signs of relative improvement in the economic status of the firm's female employees as a result of the filing of the lawsuit and subsequent trial. © by Cornell University.
• Neuman, S., & Oaxaca, R. L. (2004). Wage decompositions with selectivity-corrected wage equations: A methodological note. Journal of Economic Inequality, 2(1), 3-10.
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  Abstract: This paper examines the implications of the standard Heckman (Heckit) correction for selectivity bias in wage and earnings functions that are subsequently used in wage decompositions. Even when justified, Heckit selectivity correction introduces some fundamental ambiguities in the context of wage decompositions. The ambiguities arise from group differences in the selection term which consists of a parameter multiplied by the Inverse Mills Ratio (IMR). The parameter is identified as the product of the standard deviation of the errors in the wage equation and the correlation between the wage equation error and the selection equation error. How should group differences in these parameters be interpreted in terms of structural differences and endowment effects? The same issue arises with respect to group differences in the IMR which reflect nonlinear group differences in the determinants of selection and in the probit coefficients. © Kluwer Academic Publishers 2004.
• Baldwin, J. D., & Oaxaca, R. L. (2003). American Economic Review: Editors' introduction. American Economic Review, 93(2), vii.
• Oaxaca, R. L., & Geisler, I. (2003). Fixed effects models with time invariant variables: A theoretical note. Economics Letters, 80(3), 373-377.
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  Abstract: This paper demonstrates the equivalence between a consistent two-stage GLS estimator and the pooled OLS estimator of the coefficients on time invariant covariates in an unbalanced FE panel. In general the estimated standard errors differ between these two procedures. © 2003 Elsevier B.V. All rights reserved.
• Horrace, W. C., & Oaxaca, R. L. (2001). Inter-industry wage differentials and the gender wage gap: An identification problem. Industrial and Labor Relations Review, 54(3), 611-618.
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  Abstract: An intuitively appealing method for estimating gender wage gaps by industry is shown to yield estimates that vary according to the arbitrary choice of left-out reference groups for non-industry categorical variables, such as race and marital status. This study uses data from the Current Population Surveys to explore alternative methods for estimating gender wage gaps by industry that are not susceptible to the identification problem. Statistical significance measures reveal when relative industry wage gap rankings are not statistically meaningful. The methodology readily extends to other contexts such as racial, union-nonunion, or immigrant-native wage gaps by industry, occupational, or regional groupings.
• Cox, J. C., & Oaxaca, R. L. (1999). Can supply and demand parameters be recovered from data generated by market institutions?. Journal of Business and Economic Statistics, 17(3), 285-297.
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  Abstract: The relative accuracy of estimators in recovering supply and demand parameters can depend on the market institutions that generate the data. The parameters of known supply and demand functions are estimated with data from laboratory market experiments with human buyers and sellers. Single-equation estimators dominate simultaneous-equations estimators in recovering supply and demand parameters from posted-offer market data. The inaccuracy of simultaneous-equations estimators with posted-offer data can be explained by the implications for error distributions of the inherent properties of this market institution. Simultaneous-equations estimators perform better with closing-price data from double-auction markets.
• Leslie, L. L., McClure, G. T., & Oaxaca, R. L. (1998). Women and minorities in science and engineering: A life sequence analysis. Journal of Higher Education, 69(3), 239-276.
• Oaxaca, R. L., & Ransom, M. (1998). Calculation of approximate variances for wage decomposition differentials. Journal of Economic and Social Measurement, 24(1), 55-61.
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  Abstract: The delta method is used to estimate asymptotic variances for components of Oaxaca/Blinder style wage decompositions obtained from the semi-log regression models. Application of the method is illustrated with estimates of racial discrimination from the March 1988 CPS. Although developed in the context of estimating labor market discrimination, the variance and standard error formulas readily generalize to other contexts that use decomposition methods.
• Cox, J. C., & Oaxaca, R. L. (1995). Inducing risk-neutral preferences: Further analysis of the data. Journal of Risk and Uncertainty, 11(1), 65-79.
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  Abstract: The lottery payoff procedure does not successfully induce risk-neutral bidding behavior in first-price, sealedbid auctions. This conclusion follows from both ordinary-least-squares estimation with natural data and leastabsolute-deviation estimation with transformed data from numerous experimental designs. Lottery payoffs do not succeed in inducing behavior predicted from standard expected utility theory assumptions or from assumed utility from winning and/or income thresholds. In contrast, first-price auction experiments with monetary payoffs yield results that are consistent with general models of bidding in the independent private values information environment. © 1995 Kluwer Academic Publishers.
• Oaxaca, R. L., & Ransom, M. R. (1994). On discrimination and the decomposition of wage differentials. Journal of Econometrics, 61(1), 5-21.
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  Abstract: In this paper we examine four alternative methods for estimating the extent of labor market discrimination. All of the methods involve the decomposition of gross (unadjusted) wage differentials into discrimination and productivity components. These methods can be expressed in a single generalized form and are shown to differ with respect to the implicity assumed nondiscriminatory, competitive wage structure. Equivalencies among the methods are shown to exist under certain restrictive conditions. These methods are applied to micro data from the U.S. Current Population Survey and from a specific U.S. firm. © 1994.
• Ashenfelter, O., & Oaxaca, R. L. (1991). Labor market discrimination and economic development. Unfair advantage: labor market discrimination in developing countries, 35-53.
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  Abstract: We seek to shed light on the relationship between the process of economic development and labor market discrimination by pulling together results that are common to studies of labor market discrimination in both developed and developing economies, as well as to contrast differences that exist within the community of developing nations and between developing nations and the US. Section 2 is a review and commentary on the traditional theories of discrimination as they might apply to the studies published in this volume. Section 3 is an overview of the available statistical evidence on earnings discrimination in the labor markets of the developing nations discussed in this volume compared with evidence from US labor markets. Section 4 is a summary and conclusion. -from Authors
• Cox, J. C., & Oaxaca, R. L. (1989). Laboratory experiments with a finite-horizon job-search model. Journal of Risk and Uncertainty, 2(3), 301-329.
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  Abstract: In this article we explain the essential role of controlled experiments in testing job-search models. We derive the testable implications of a finite-horizon job-search model and lay out the design of the controlled experiments that we use to test those implications. We present the results of several parametric and nonparametric tests, all conditional on the actual draws of the wage offers. Overall, we find close agreement between the predictions of the search model and observations of search duration and income for several experimental treatments. © 1989 Kluwer Academic Publishers.
• Oaxaca, R. L., & Ransom, M. R. (1988). Searching for the effect of unionism on the wages of union and nonunion workers. Journal of Labor Research, 9(2), 139-148.
• Oaxaca, R. L., & Taylor, C. A. (1986). Simulating the impacts of economic programs on urban areas: The case of unemployment insurance benefits. Journal of Urban Economics, 19(1), 23-46.
• Auster, R. D., & Oaxaca, R. L. (1981). Identification of supplier induced demand in the health care sector.. Journal of Human Resources, 16(3), 327-342.
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  PMID: 7264294;Abstract: This paper explores the issues and pitfalls encountered when attempting to test empirically the hypothesis that physician, hospital, or any other input supply level induces increasing demand for health services in the strict sense of demand shift and, through that, increased demand for the input in question. Evidence is presented which suggests that an empirical test of the supplier induced demand (SID) hypothesis of the type traditionally performed may not in fact be feasible with cross-sectional aggregate data such as is usually used.