Decomposing the Composition Effect: The Role of Covariates in Determining Between-Group Differences in Economic Outcomes

@inproceedings{Rothe2015DecomposingTC,
  title={Decomposing the Composition Effect: The Role of Covariates in Determining Between-Group Differences in Economic Outcomes},
  author={Christoph Rothe},
  year={2015}
}
In this article, we study the structure of the composition effect, which is the part of the observed between-group difference in the distribution of some economic outcome that can be explained by differences in the distribution of covariates. Using results from copula theory, we derive a new representation that contains three types of components: (i) the "direct contribution" of each covariate due to between-group differences in the respective marginal distributions, (ii) several "two-way" and… CONTINUE READING

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