Treatment effects on within-group and between-group inequality. A causal decomposition approach

Benjamin Rosche
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Benjamin Rosche: Cornell University

No f53kz, SocArXiv from Center for Open Science

Abstract: The recent surge in inequality has been linked to growing disparities both within and between economic strata. Existing approaches to analyzing changes in inequality, however, often ignore within-group inequality by solely analyzing mean differences between groups. Approaches that do allow examining both changes in within- and between-group inequality in turn are limited in addressing causal questions about why inequality is changing. This paper introduces a novel approach to analyzing how a treatment variable affects both changes in within- and between-group inequality and decomposing these changes into compositional and behavioral effects. The procedure combines a classic variance decomposition with the Kitagawa-Blinder-Oaxaca (KBO) decomposition approach. Compared to KBO, however, the method allows analyzing treatment effects not only on the mean but on the whole conditional distribution. I demonstrate the utility of the approach with an application analyzing the changing impact of motherhood on women’s earnings and its consequences for earnings inequality.

Date: 2022-04-09
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Persistent link: https://EconPapers.repec.org/RePEc:osf:socarx:f53kz

DOI: 10.31219/osf.io/f53kz

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