GU_normalization {ddecompose}

Gardeazabal and Ugidos normalization of factor variables

Description

The function performs the normalization of the factor variables proposed by Gardeazabal and Ugidos (2004, GU) to estimate detailed decompositions that do not depend on the chosen reference levels of the factor variables.

Usage

GU_normalization(formula, data, weights, group)

Arguments

formula

an object of class "formula". See lm for further details.

data

a data frame containing the variables in the model.

weights

numeric vector of non-negative observation weights, hence of same length as dep_var.

group

name of the a binary variable (numeric or factor) identifying the two groups that will be compared.

Value

a list containing the adjusted formula, adjusted data, adjusted coefficient names, and the normalized regressors for prediction and the

References

Gardeazabal, Javier, and Arantza Ugidos. 2004. "More on identification in detailed wage decompositions." Review of Economics and Statistics 86(4): 1034-1036.

Examples

data("men8305")
mod1 <- log(wage) ~ union + married + nonwhite + education + experience
normalized_data <- GU_normalization(
  formula = mod1,
  data = men8305,
  weights = weights,
  group = year
)