A little theory! Let's make a revision!

As we mentioned in the previous modules there are several theories dealing with the decomposition of causal factors of pay gaps. We have used the method by Oaxaca and Blinder (1973). The model of Oaxaca and Blinder comprises the following steps:

• women's and men's wages are estimated separately.

• the difference between men's and women's wages is divided into a part explained by the differences of characteristics (endowment effect) and a part left unexplained by the structural causes.
• the part left is the discrimination (remuneration effect).