Pro-poorness of rural economic growth and the roles of education in Bhutan, 2007–2017

Among south Asian countries, Bhutan has the second lowest poverty incidence; but, there is a large difference in poverty incidence between urban and rural areas. While urban areas registered a very small poverty incidence, 12.0% of rural population were still below the national poverty line in 2017. Poverty is by and large a rural phenominon in Bhutan. Against this background, this study examines whether Bhutan’s rural economic growth was pro-poor from 2007–2017 by using the Bhutan Living Standard Surveys. It also conducts an IV probit analysis to explore the determinants of poverty. Even in rural areas, growth is necessary for the reduction of poverty. Besides relying on trickle-down effects from hydropower projects and tourism, promotion of agriculture-based small scale industries is essential for the acceleration of rural economic growth, where further development of basic industrial and transportation infrastructure and socioeconomic facilities is imperative. The country also needs to promote and strengthen basic education since education is found to have played an important role in reducing poverty. Many rural households are vulnerable to poverty. To prevent vulnerable households from falling into poverty, more effective social safety net programs may be necessary based on regional differences in factors affecting living conditions.