Gender Wage Discrimination in Rural and Urban Labour Markets of Bangladesh

Female wages in Bangladesh are significantly lower compared to male wages. This paper seeks to quantify the extent of discrimination in explaining this gender wage gap. We decompose the gender wage differential into a component that can be explained by differences in productive characteristics and a component unexplained by observable productive differences, which are attributed to discrimination. We examine this issue both for rural and urban areas in Bangladesh, using individual level unit record data. Methodologically, we use a number of different approaches to decompose the wage gap between the “explained” and the “unexplained” components. Our results show that gender wage differentials are considerably larger in urban areas compared to rural areas. The decomposition analysis suggests that a significant portion of this gender wage gap results from discrimination. We also find that failure to correct for sample selection bias leads to a significant under estimation of the gender wage gap in both rural and urban areas. Our results have significant policy implications.