Abstract
The traditional wage gap decomposition accounts for differences across demographic groups in wages and in the determinants of wages. The analysis decomposes the wage gap in a particular year into a portion explained by average group differences in productivity characteristics and a residual portion that is commonly attributed to discrimination. The low-cost data requirements and the intuitive appeal help to explain the popularity of the traditional procedure as a starting point for estimating the extent of wage discrimination. Researchers have subsequently introduced a number of extensions that build more detailed steps into the decomposition in order to provide a richer set of results. Evidence from these decompositions can provide a more finely-tuned benchmark as to the degree to which discrimination serves as an explanation for the presence and persistence of group differences in average wages.