ABSTRACT
This chapter considers the linkage of empirical estimates of wage discrimination between two groups, as introduced by Oaxaca (1973), to a theoretical model of employers’ discriminatory behavior. Oaxaca’s widely used empirical technique estimates wage discrimination by determining how much of the wage differential between two groups is due to differences in coefficients of separately estimated wage regressions. (For examples, see Blinder, 1973; Malkiel and Malkiel, 1973; Corcoran and Duncan, 1979; Ferber and Green, 1982.) The more general basis of this technique is a comparison of the wage structures for the two groups-captured in coefficients from separately estimated regressions-to an estimate of the wage structure that would prevail in the absence of discrimination (Reimers, 1983). The component of the wage differential due to differences between the existing and the “no-discrimination” wage structure is attributed to discrimination. The remainder, which is due to differences in characteristics, is interpreted as nondiscriminatory.1
