Economic Divides: Disparities in Wages and Household Earnings in Bangladesh
Abstract:
This study examines the effects of human capital—specifically, education and work experience—and social factors, such as age, gender, location, and economic activity, on household income in Bangladesh, using data from the Household Income and Expenditure Surveys (HIES) for 2010 and 2016. Employing Ordinary Least Squares (OLS) and Instrumental Variable (IV) regression techniques, including Two-Stage Least Squares (2SLS) and the Generalized Method of Moments (GMM), the analysis reveals that both human capital and social factors have a moderate influence on income over time, with substantial income variability explained by these variables. Findings from the OLS and IV models indicate that returns to education and additional years of work experience have a consistently positive impact on income across both rural and urban areas in the two survey years. However, wage disparities widened significantly in 2016: the gender wage gap increased to 44.1%, the rural-urban gap to 19.4%, and the industrial-service sector gap to 5%, all of which were notably higher than in 2010. Urban males and females earned significantly more than their rural counterparts in both years. The study also highlights a persistent wage advantage in the service sector compared to the agricultural and industrial sectors in 2016. At the same time, the wage differential between agricultural and non-agricultural sectors narrowed, indicating improved wage growth within the agricultural sector. Furthermore, the marginal return to an additional year of education was found to be higher for females than males, underscoring the critical economic value of investing in women’s education. Given that both human capital and social variables play a significant role in shaping income dynamics, strategic policy interventions and targeted investments are essential for addressing wage inequality, reducing socio-economic disparities, and fostering inclusive development in Bangladesh.
Citation:
Mamun, A., Arfanuzzaman, M., & Nishat, N. J. (2022). Economic Divides: Disparities in Wages and Household Earnings in Bangladesh. CPER Working Paper Series No. 01., Available at CPER: https://cperbd.org/working-paper/2#
This study examines the effects of human capital—specifically, education and work experience—and social factors, such as age, gender, location, and economic activity, on household income in Bangladesh, using data from the Household Income and Expenditure Surveys (HIES) for 2010 and 2016. Employing Ordinary Least Squares (OLS) and Instrumental Variable (IV) regression techniques, including Two-Stage Least Squares (2SLS) and the Generalized Method of Moments (GMM), the analysis reveals that both human capital and social factors have a moderate influence on income over time, with substantial income variability explained by these variables. Findings from the OLS and IV models indicate that returns to education and additional years of work experience have a consistently positive impact on income across both rural and urban areas in the two survey years. However, wage disparities widened significantly in 2016: the gender wage gap increased to 44.1%, the rural-urban gap to 19.4%, and the industrial-service sector gap to 5%, all of which were notably higher than in 2010. Urban males and females earned significantly more than their rural counterparts in both years. The study also highlights a persistent wage advantage in the service sector compared to the agricultural and industrial sectors in 2016. At the same time, the wage differential between agricultural and non-agricultural sectors narrowed, indicating improved wage growth within the agricultural sector. Furthermore, the marginal return to an additional year of education was found to be higher for females than males, underscoring the critical economic value of investing in women’s education. Given that both human capital and social variables play a significant role in shaping income dynamics, strategic policy interventions and targeted investments are essential for addressing wage inequality, reducing socio-economic disparities, and fostering inclusive development in Bangladesh.
Mamun, A., Arfanuzzaman, M., & Nishat, N. J. (2022). Economic Divides: Disparities in Wages and Household Earnings in Bangladesh. CPER Working Paper Series No. 01., Available at CPER: https://cperbd.org/working-paper/2#