Rural Urban Wage Gap in Bangladesh : Evidence from HIES 2022

Abstract

This study examines the rural–urban wage gap in Bangladesh using data from the Household Income and Expenditure Survey (HIES) 2022. Applying the Oaxaca–Blinder decomposition method, along with quantile decomposition and propensity score matching, we analyze the extent to which differences in wages can be explained by observable characteristics such as education, occupation, and sectoral affiliation, and how much remains unexplained. Results reveal a significant wage premium for urban workers, with education and occupational structure accounting for the largest share of the explained gap. However, a substantial unexplained component persists, suggesting structural disadvantages for rural workers. These findings have important policy implications for reducing spatial inequality, improving rural education, skills development, and promoting inclusive economic growth in Bangladesh. Keywords: Wage inequality, Human capital, Rural–urban gap, Labor markets in Bangladesh, Oaxaca–Blinder decomposition, Quantile decomposition, Household Income and Expenditure Survey (HIES) 2022. JEL Codes: J31 (Wage Level and Structure; Wage Differentials), O15 (Human Resources; Human Development; Income Distribution; Migration ), R23 ( Regional Labor Markets; Neighbourhood Characteristics ),J24 (Human Capital; Skills; Occupational Choice; Labor Productivity),C21 (Cross-Sectional Models; Quantile Regression; Decomposition Methods; Treatment Effect Models)