Pay differences between teachers and other occupations: Some empirical evidence from Bangladesh

This paper addresses a popular debate on teacher pay in a developing country context, namely whether teachers are under-paid or over-paid. Using national level household survey data from Bangladesh, we find that teachers are significantly under-paid in comparison to non-teachers who possess similar human capital and other observed characteristics. A decomposition exercise of the teacher non-teacher wage gap reveals that the teacher non-teacher salary difference is driven mostly by differential returns to observed characteristics. Our results suggest that there is some equity justification for allowing an "across-the-board'' increase in teacher pay particularly for female, rural and aided school teachers in Bangladesh. (C) 2006 Elsevier Inc. All rights reserved.