ABSTRACT
There has been extensive research on wage differentials by gender or race, often based on human capital theory. Blinder (1973) and Oaxaca (1973) were the first to decompose the earnings gap between two groups into a component reflecting differences in human capital characteristics and another one, often called discrimination, referring to unequal market treatment. Alternative decomposition procedures were later suggested (see, for example, Reimers, 1983; Cotton, 1988; Oaxaca and Ransom, 1994) that differed mainly in the implicit assumptions made concerning the rates of return on human capital characteristics that would have prevailed in the market in the absence of discrimination. Similar methods were also used to analyze the change over time in the earnings gap, although a new approach, considering somewhat different factors, was suggested by Juhn, Murphy and Pierce (1991).
