Empirical likelihood inference for Oaxaca–Blinder decomposition

Abstract

This paper proposes an empirical likelihood inference method for the Oaxaca–Blinder decompositions. In contrast to the conventional Wald statistic using the delta method, our approach circumvents the linearization errors and estimation of the variance terms. Furthermore, the shape of the resulting empirical likelihood confidence set is determined flexibly by data. Simulation results illustrate usefulness of the proposed inference method. • Empirical likelihood inference is proposed for Oaxaca–Blinder decompositions. • Our approach circumvents linearization errors and variance estimation. • Numerical examples illustrate usefulness of our method.