Sectoral Wage Differentials in Bangladesh: A Comparison Between the Government and Other Ownerships

Abstract

Most of the studies of wage discrimination in Bangladesh have calculated the gap between pairs of sectors, while this study uses multiple sectors using multinomial logit estimation where the sector selection is endogenous. The employment sector is divided into six heterogeneous sectors depending on ownership status. Using QLFS 2016–2017 data from the Bangladesh Bureau of Statistics, the probability of being employed in a certain sector is initially estimated by the sector choice equation, and then we estimate both the conditional and unconditional wage gaps between government and other sectors. The estimation result of the sector choice shows that the probability of being included in the government sector mostly depends on educational qualification, and the rural population is mostly included in marginal sectors like individual proprietorship. The decomposition of wage discrimination indicates that government employees have a wage advantage over every other sector, except for females. The decomposition result also suggests that the wage gap is mostly driven by discrimination, with NGOs showing the most discrimination in wages offered, followed by the individual sector. Monitoring the wage structure and implementation of the minimum wage is our main policy recommendation, along with others.

KEYWORDS:

• Multinomial wage
• wage differentials
• wage gap
• sectoral wage gap

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 For the interpretation of dummy variables in semi-logarithmic equations, Halvorsen and Palmquist (1980) explain the exact percentage change is equals to $e^{\text{β}}-1$.

Additional information

Notes on contributors

Md Aminur Rahman

Md Aminur Rahman, rising economist and sustainability researcher. His notable publication in Environmental Science and Pollution Research (2021) delves into innovative eco-footprint solutions for south asia.

Woo-Yung Kim

Woo-Yung Kim, a professor of economics, writes papers on both labor and regional economics. Among his recent publications are Do Unions Provide Employment Protection in Times of Economic Crisis?: A Natural Experiment of COVID-19 (International Labour Review 2023) and The Decline of the Self-employment Rate in Australia (Australian Economic Review 2014).