Gender wage inequality in Bhutan: Regional and distributional decompositions

Bhutan’s Gross National Happiness framework places equity and wellbeing at the centre of development policy, yet evidence on gendered labour market outcomes remains limited. We estimate the gender wage gap in Bhutan both nationally and regionally using data from the Labour Force Survey for the period 2011-2022. We then decompose the gap using the Blinder-Oaxaca method at the mean and Juhn-Murphy-Pierce decompositions across the wage distribution. We find a persistent female wage penalty that remains statistically significant after conditioning on observed worker and job characteristics and correcting for selection, alongside a large participation disadvantage for women. Mean decompositions indicate that unequal returns to observable characteristics account for most of the average wage gap, particularly in urban areas where endowment differences explain little. Distributional decompositions show substantial heterogeneity, with the largest disparities concentrated at the bottom of the wage distribution, consistent with sticky-floor dynamics; patterns in urban labour markets further suggest constraints on women’s wage progression. Overall, the results imply that narrowing gender wage inequality in Bhutan requires policies that jointly relax barriers to women’s paid employment and strengthen pay-setting and progression mechanisms, with targeted attention to rural labour markets and low-wage work.