The Oaxaca Decomposition Applied to a Continuous Group Variable (With an Extension to a Probit Model)
16 Pages Posted: 17 Nov 2010 Last revised: 13 Mar 2011
Date Written: November 15, 2010
Almost universally, the Oaxaca (1973) decomposition is used to compare the outcomes between two discrete groups, e.g., black and white or male and female. In many applications, however, groups are not readily divided into discrete bins. The purpose of this paper is to extend the Oaxaca decomposition to examine differences amongst groups that are most naturally modeled as at a point in a continuum. This paper also extends the Oaxaca decomposition to a probit model.
Keywords: Oaxaca decomposition, continuous Oaxaca decomposition, wage gap
JEL Classification: J31
Suggested Citation: Suggested Citation