The gender wage gap in Bangladesh: an application of Olsen and Walby simulation method

This article examines the gender wage gap in the formal public and private sectors in Bangladesh. The traditional Oaxaca method focuses on the explained and unexplained part of the wage gap; in this paper we use the Olsen and Walby (2004) simulation method which emphasises only the explained part of the wage gap. Using the Bangladesh Labour Force Survey 2005-2006, Bangladesh Bureau of Statistics data show formal-sector female employees earned about 32.1 per cent less than their male counterparts (2008). Using the Olsen and Walby (2004) simulation method for the first time in the Bangladeshi context, the results reported here show that age and educational differences and industrial and occupational segregation played important roles in explaining the gender pay gap in Bangladesh. However, ‘being female’ was also an important determinant of lower female earnings. These results show the importance of policies to boost female education and training in Bangladesh. They also indicate the need for policies to promote female participation in the formal-sector workforce, including improvements in childcare and transport availability. JEL Codes: J310, J450, J710