Unexplained gaps and Oaxaca-Blinder decompositions

B-Tier
Journal: Labour Economics
Year: 2010
Volume: 17
Issue: 1
Pages: 284-290

Score contribution per author:

0.670 = (α=2.01 / 3 authors) × 1.0x B-tier

α: calibrated so average coauthorship-adjusted count equals average raw count

Abstract

We analyze four methods to measure unexplained gaps in mean outcomes: three decompositions based on the seminal work of Oaxaca (1973) and Blinder (1973) and an approach involving a seemingly naïve regression that includes a group indicator variable. Our analysis yields two principal findings. We show that the coefficient on a group indicator variable from an OLS regression is an attractive approach for obtaining a single measure of the unexplained gap. We also show that a commonly-used pooling decomposition systematically overstates the contribution of observable characteristics to mean outcome differences when compared to OLS regression, therefore understating unexplained differences. We then provide three empirical examples that explore the practical importance of our analytic results.

Technical Details

RePEc Handle
repec:eee:labeco:v:17:y:2010:i:1:p:284-290
Journal Field
Labor
Author Count
3
Added to Database
2026-01-25