Measuring the gender wage gap—a methodological note

We propose to estimate the Blinder-Oaxaca decomposition by a single-equation model augmented with interactions between the group membership and other predictors. The relative importance of predictors on the discriminatory wage gap is examined by the interaction coefficients, which may lead to very different conclusions than the usual percentage calculations using the detailed decomposition method. Comparisons are made between the traditional interpretations and those suggested here using wage data from Finland. The decomposition analysis suggests that the discriminatory male-female wage gap is largely related to work experience, while our preferred model points to the importance of family gap and working industry.