[Journal:] IZA World of Labor [ISSN:] 2054-9571 [Year:] 2017 [Issue:] 347
Differences in wages between men and women, white and black workers, or any two distinct groups are a controversial feature of the labor market, raising concern about discrimination by employers. Decomposition methods shed light on those differences by separating them into: (i) composition effects, which are explained by differences in the distribution of observable variables, e.g. education level; and (ii) structural effects, which are explained by differences in the returns to observable and unobservable variables. Often, a significant structural effect, such as different returns to education, can be indicative of discrimination.
decomposition methods Oaxaca-Blinder Decomposition quantile decomposition wage gap