Oaxaca decomposition

Oaxaca decomposition is a statistical method that explains the difference in the means of a dependent variable between two groups by decomposing the gap into that part that is due to differences in the mean values of the independent variable within the groups, on the one hand, and group differences in the effects of the independent variable, on the other hand. The method was introduced by Ronald Oaxaca in his doctoral thesis at Princeton University and eventually published in 1973.^[1] Oaxaca's original research question was the wage differential between two different groups of workers, but his method has since been applied to numerous other topics.^[2]

See also

• Standardization (demographics)

References

1. Oaxaca, R. (1973). "Male-Female Wage Differentials in Urban Labor Markets". International Economic Review 14 (3): 693–709. JSTOR 2525981.
2. O'Donnell, Owen A.; et al. (2008). "Explaining Differences between Groups: Oaxaca Decomposition". Analyzing Health Equity Using Household Survey Data: A Guide to Techniques and Their Implementation. World Bank Publications. pp. 147–158.

Further reading

• Borjas, Goerge J. (2000). "Measuring Discrimination". Labor Economics (Second ed.). Boston: Irwin McGraw-Hill. pp. 362–366. ISBN 0-07-231198-3.
• Cahuc, Pierre; Carcillo, Stéphane; Zylberberg, André (2014). "Decomposition Methods: The Case of the Gender Wage Gap". Labor Economics. Cambridge: MIT Press. pp. 504–514. ISBN 978-0-262-02770-0.
• Fortin, Nicole; Lemieux, Thomas; Firpo, Sergio (2011). "Decomposition Methods in Economics". Handbook of Labor Economics. Elsevier. pp. 1–102. doi:10.1016/S0169-7218(11)00407-2. ISBN 978-0-444-53450-7.