This chapter starts the theoretical discussion with a comprehensive overview of economic theories that interpret gender differentials in the labor market to identify the theoretical framework of the overall study. Economists historically attribute gender inequality between women and men to rational self-interest towards human capital and psychological traits. It is also commonly explained by discrimination. Recent trends in gender research in economics indicate an emerging focus on gender identity and stereotypes. Among these is economics of identity, first proposed by Akerlof and Kranton, which considers the influence of social norms on individual choices, thus representing a major shift from the former standard approaches. It is a pioneering framework that bridges economic and social psychology theory to analyze phenomena of identity-based discrimination and role conceptions in society. Equally significant is the cross-disciplinary explanatory power of the framework in understanding gender theories from other fields. Notably, the underlying decision-making process in the economics of identity demonstrates a characteristic akin to a performativity-based theory of gender as championed in social science research. The identity framework is relevant to both interpret the key elements of the theory and introduce economic insights. This chapter examines the economics of gender and sheds light on the remarkable, previously underexplored, potential of the identity approach.