Do covariates explain why these groups differ? The choice of reference group can reverse conclusions in the Oaxaca-Blinder decomposition
A new paper on arXiv explores the Oaxaca-Blinder decomposition (OBD), a statistical tool used to differentiate between group differences caused by covariates versus outcomes. The research demonstrates that the choice of a reference group in OBD can lead to substantively different conclusions, a sensitivity that is more pronounced with complex regression models, including pretrained transformers. The findings indicate that large datasets and modern machine learning do not inherently solve this conclusion reversal problem, suggesting practitioners should report both directions of the OBD and that further research is needed. AI
IMPACT Highlights a potential pitfall in using statistical methods with complex models like transformers, impacting how AI-driven analyses are interpreted.