Discrimination or differing model structures? Alternatives and extensions to Blinder-Oaxaca decomposition

The Blinder-Oaxaca (B-O) decomposition has been widely used in continuous outcome comparisons between two groups of people; however, controversies and limitations with this method remain. In this paper, operating under the same-model structure, we suggest employing a multiple regression using a dummy variable to represent discrimination, and we compare this strategy with results obtained from a B-O decomposition and a Neumark decomposition, both in theory and using a simulation study. In addition, we extend these methods to cover binary outcomes. Keywords: Blinder-Oaxaca decompostion, Neumark decomposition, multiple regression, discrimination DOI 10.3233/JEM-2009-0320