Why Is The Evolution of Urban-Rural Wage Disparities in Bangladesh Slow

  • Authors

    • Md Aminur Rahman Assistant Professor, G2 Big Data Management Department, Gangseo University
    https://doi.org/10.14419/kgn36966

    Received date: August 19, 2025

    Accepted date: September 23, 2025

    Published date: September 29, 2025

  • Bangladesh, Dynamic decomposition, regional wage differentials, Labor economics, Urban-rural wage gap

  • Abstract

    Instead of studying at a static point, this article has studied the dynamics of urban-rural wage disparities in Bangladesh by analyzing cross-sectional data derived from the labor force survey conducted during two distinct periods. The study utilizes the Juhn–Murphy–Pierce (JMP) decomposition method and extends it by adding propensity score matching (PSM) to derive empirical results. Moreover, the bootstrapping method determined the significance level of the empirical result. The findings of the study demonstrate that the pace of the reduction of the wage gap is impeded, mainly due to human capital and urban-centric industries. Based on the findings, it is recommended to prioritize investments in education and skills development and make policies to attract educated and skilled labor in rural areas. This paper provides informative details about the wage disparities between urban and rural areas in Bangladesh, which could be advantageous for academicians, researchers, planners, and policymakers.

  • References

    1. Abowd, J. M., Kramarz, F., & Margolis, D. N. (1999). High wage workers and high wage firms. Econometrica, 67(2), 251-333.
    2. Adamchik, V. A., and Bedi, A. S. (2000). Wage differentials between the public and the private sectors: Evidence from an economy in transition. Labour Economics, 7(2), 203-224.
    3. Akita, T., & Miyata, S. (2021). Urban and Rural Dimensions of the Role of Education in Inequality: A Comparative Analysis Between Indonesia, Myanmar, and the Philippines. Rural–Urban Dichotomies and Spatial Development in Asia, 127-166.
    4. Akter, S. (2005). Occupational Segregation, Wage Discrimination, and Impact on Poverty in Rural Bangladesh. The Journal of Developing Areas, 15-39.
    5. Ananian, S., & Dellaferrera, G. (2024). Employment and wage disparities between rural and urban areas (No. 107). ILO Working Paper.
    6. Autor, D. H., Dorn, D., & Hanson, G. H. (2013). The China Syndrome: Local labor market effects of import competition in the United States. American Economic Review, 103(6), 2121-2168.
    7. Autor, D., Katz, L.; Kearney, M. (2006): The Polarization of the U.S. Labor Market. American Economic Review, 96(2), 189–194.
    8. BBS. (2020). Gender statistics of Bangladesh 2020. Dhaka: Bangladesh Bureau of Statistics, Statistics and Informatics Division (SID), Ministry of Planning.
    9. Blau, F. D., & Kahn, L. M. (2017). The gender pay gap: Extent, trends, and explanations. Journal of Economic Literature, 55(3), 789-865.
    10. Blau, F. D., & Kahn, L. M. (2017). The gender pay gap: Extent, trends, and explanations. Journal of Economic Literature, 55(3), 789-865.
    11. Blinder, A. (1973). Wage discrimination: Reduced form and structural estimates. Journal of Human resources, 8, 436–455.
    12. Borodkin, L., Granville, B., & Leonard, C. S. (2008). The rural/urban wage gap in the industrialisation of Russia, 1884–1910. European Review of Economic History, 12(1), 67-95.
    13. Brixy, U., Brunow, S., & Ochsen, C. (2022). The urban-rural wage gap in Germany (No. 4/2022). IAB-Discussion Paper.
    14. Card, D., & Krueger, A. B. (1995). Myth and measurement: The new economics of the minimum wage. Princeton University Press.
    15. Carlstrom, C. T., & Rollow, C. D. (1998). Regional variations in white-black earnings. Economic Review-Federal Reserve Bank of Cleveland, 34, 10-22.
    16. Cotton, J. (1993). A regional analysis of black male–white male wage difference. The Review of Black Political Economy, 22 (1), 55–71.
    17. Dauth, W., Findeisen, S., Moretti, E., & Suedekum, J. (2016). Spatial wage disparities–Workers, firms, and assortative matching. Mimeo, Heinrich Heine University Düsseldorf.
    18. Davis, D. R., & Haltiwanger, J. C. (1991). Wage dispersion between and within U.S. manufacturing plants, 1963-1986. Brookings Papers on Eco-nomic Activity, 1991(2), 115-200.
    19. Dickie, M., & Gerking, S. (1998). Interregional wage disparities, relocation costs, and labor mobility in Canada. Journal of Regional Science, 38(1), 61-87.
    20. Eberts, R. W., & Schweitzer, M. E. (1994). Regional wage convergence and divergence: adjusting wages for cost-of-living differences. Economic Review (Federal Reserve Bank of Cleveland), 20, 26-37.
    21. Freeman, R. B. (1993). Labor market institutions and the structure of wages: A comparative analysis. Labour Economics, 1(1), 1-28.
    22. Garcia, I., & Molina, J. A. (2002). Inter-regional wage differentials in Spain. Applied Economics Letters, 9, 209–215.
    23. Ghosh, P. K., & Lee, J. Y. (2016). Decomposition of changes in Korean wage inequality, 1998–2007. Journal of Labor Research, 37, 1-28.
    24. Goos, M., Manning, A., & Salomons, A. (2009). Job polarization in Europe. American economic review, 99(2), 58-63.
    25. Herrera-Idárraga, P., López-Bazo, E., & Motellón, E. (2016). Regional Wage Gaps, Education and Informality in an Emerging Country: The Case of Colombia. Spatial Economic Analysis, 11(4), 432–456.
    26. Ishtiaque, A. and Mahmud, M. S. (2017). Migration objectives and their fulfillment: A micro study of the ruralurban migrants of the slums of dhaka city. Geografia-Malaysian Journal of Society and Space, 7(4), 24–29.
    27. Juhn, C., Murphy, K. M., & Pierce, B. (1991). Accounting for the slowdown in black-white wage convergence. Workers and their wages, 107-43.
    28. Juhn, C., Murphy, K. M., & Pierce, B. (1993). Wage inequality and the rise in returns to skill. Journal of Political Economy, 101, 410–442.
    29. Kim, D., & Kim, W. Y. (2020). What drives the labor share of income in South Korea? A regional analysis. Growth and Change, 51(3), 1304-1335.
    30. Kim, K. S., Min, I., & Choi, Y. S. (2015). Dynamic decomposition of regional wage differentials in Korea. The Social Science Journal, 52(3), 311-321.
    31. Lim, U., & Cho, S. C. (2009). The decomposition of regional wage differentials in Korea. The Social Science Journal, 46(2), 375-383.
    32. Mankiw, N. G. (2021). Principles of Economics (9th ed.). Cengage Learning.
    33. Oaxaca, R. L. (1973). Male–female wage differentials in urban labor markets. International Economic Review, 14, 693–709.
    34. Oaxaca, R. L., & Ransom, M. R. (1994). On discrimination and the decomposition of wage differentials. Journal of Econometrics, 61, 5–21.
    35. Pereira, J., & Galego, A. (2007). Regional wage differentials: static and dynamic approaches. CEFAGE-UE Working Paper, 7.
    36. Pereira, J., & Galego, A. (2011). Regional wage differentials in Portugal: Static and dynamic approaches. Papers in Regional Science, 90(3), 529-549.
    37. Piketty, T. (2014). Capital in the twenty-first century. Harvard University Press.
    38. Rahaman, M. M., & Ahmed, T. S. (2016). Affordable water pricing for slums dwellers in Dhaka metropolitan area: The case of three slums. Journal of Water Resource Engineering and Management, 3(1), 15-33.
    39. Rahman, M. A., & Kim, W. Y. (2023). Sectoral Wage Differentials in Bangladesh: A Comparison Between the Government and Other Ownerships. International Economic Journal, 37(4), 713–733.
    40. Roback, J. (1988). Wages, rents, and amenities: differences among workers and regions. Economic Inquiry, 26(1), 23-41.
    41. Roca, J. D. L., & Puga, D. (2017). Learning by working in big cities. The Review of Economic Studies, 84(1), 106-142.
    42. Romer, D. (2018). Advanced Macroeconomics (5th ed.). McGraw-Hill Education.
    43. Rosenbaum, P. R., & Rubin, D. B. (1983). The central role of the propensity score in observational studies for causal effects. Biometrika, 70(1), 41-55.
    44. Rosenzweig, M. R. (1978). Rural wages, labor supply, and land reform: A theoretical and empirical analysis. The American Economic Review, 68(5), 847-861.
    45. Sahling, S., & Smith, A. (1983). The neoclassical theory of wage equalization and regional wage disparities. Journal of Economic Perspectives, 7(4), 45-56.
    46. Todaro, M. P. (1969). A model of labor migration and urban unemployment in less developed countries. The American economic review, 59(1), 138-148.
    47. Vera‐Toscano, E., Phimister, E., & Weersink, A. (2004). Panel estimates of the Canadian rural/urban women's wage gap. American Journal of Agri-cultural Economics, 86(4), 1138-1151.
    48. Wang, H., Fidrmuc, J., & Luo, Q. (2021). A spatial analysis of inward FDI and urban–rural wage inequality in China. Economic Systems, 45(3), 100902.
    49. Young, A. (2013). Inequality, the urban-rural gap, and migration. The Quarterly Journal of Economics, 128(4), 1727-1785.
    50. Zhang, X., & Zhang, K. H. (2003). How does globalization affect regional inequality within a developing country? Evidence from China. Journal of Development Studies, 39(4), 47-67.

  • Downloads

  • How to Cite

    Rahman, M. A. (2025). Why Is The Evolution of Urban-Rural Wage Disparities in Bangladesh Slow. International Journal of Accounting and Economics Studies, 12(5), 1073-1083. https://doi.org/10.14419/kgn36966