Unexplained Gaps and Oaxaca-Blinder Decompositions

Todd Elder, John Goddeeris and Steven Haider

No 4159, IZA Discussion Papers from Institute of Labor Economics (IZA)

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.

Keywords: decompositions; discrimination (search for similar items in EconPapers)
JEL-codes: J15 J16 J24 J31 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2009-04
New Economics Papers: this item is included in nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

Published - published in: Labour Economics, 2010, 17 (1), 284-290

Downloads: (external link)
https://docs.iza.org/dp4159.pdf (application/pdf)

Related works:
Journal Article: Unexplained gaps and Oaxaca-Blinder decompositions (2010)
Working Paper: Unexplained Gaps and Oaxaca-Blinder Decompositions (2009)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:iza:izadps:dp4159

Ordering information: This working paper can be ordered from
IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany

Access Statistics for this paper

More papers in IZA Discussion Papers from Institute of Labor Economics (IZA) IZA, P.O. Box 7240, D-53072 Bonn, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Holger Hinte ().