Primary Submission Category: Causal Fairness, and Bias/Discrimination
Advancing Distribution Decomposition Methods Beyond Common Supports: Applications to Racial Disparities
Authors: Bernardo Modenesi,
Presenting Author: Bernardo Modenesi*
I generalize and state-of-the-art approaches that decompose differences in the distribution of a variable of interest between two groups into a portion explained by covariates and a residual portion. The method I propose relaxes the overlapping supports assumption commonly imposed in causal inference methods that compare groups, such as Oaxaca-Blinder and propensity score methods, which allows groups being compared to not necessarily share exactly the same covariate support. I illustrate my method revisiting the black-white wealth gap in the U.S. as a function of labor income and other variables. Traditionally used decomposition methods would trim (or assign zero weight to) observations that lie outside the common covariate support region. On the other hand, by allowing all observations to contribute to the existing wealth gap, I find that otherwise trimmed observations contribute from 3% to 19% to the overall wealth gap, at different portions of the wealth distribution.