Gender Gap Decomposition

Gender gap decomposition, most often implemented as the Oaxaca-Blinder decomposition, splits the mean difference in an outcome such as wages between men and women into a part explained by differences in measured characteristics (education, experience, occupation) and an unexplained residual part attributed to differences in how those characteristics are rewarded. Introduced independently by Ronald Oaxaca and Alan Blinder in 1973, it is the workhorse method for quantifying how much of the gender pay gap reflects composition versus differential treatment.