Methodological note · Labour economics · 29 May 2026
The wage-gap decomposition that didn't decompose cleanly
Blinder-Oaxaca decompositions report an "explained" share and an "unexplained" residual usually labelled as discrimination. When the residual is sixty to eighty per cent of the gap — as it usually is in Indian gender and caste wage analyses — that is not a finding about discrimination. It is a finding about occupational segregation, selection into the labour force, the limits of years-of-schooling as a skill proxy, and noisier wage measurement for the populations the residual absorbs. The residual is whatever the model did not have a variable for.