TY  - RPRT
        AU  - Heitmueller, Axel
        TI  - A Note on Decompositions in Fixed Effects Models in the Presence of Time-Invariant Characteristics
        PY  - 2005/Dec/
        PB  - Institute of Labor Economics (IZA)
        CY  - Bonn
        T2  - IZA Discussion Paper
        IS  - 1886
        UR  - https://www.iza.org/index.php/publications/dp1886
        AB  - Though theoretically appealing and very popular amongst labour economists, the interpretation of the unexplained part of the Oaxaca (1973) decomposition as discrimination rather than an omitted variable problem in cross-section data has often been criticised. In this note it is shown that this problem extends also to panel data and moreover that in a fixed effects model including time invariant regressors omitted variables are a necessary and deliberate consequence. Monte Carlo simulation is used to show the extent of the bias. Special cases and practical implications are discussed.
        KW  - decomposition
KW  - fixed effects
KW  - Monte Carlo study
        ER  -