Can Skill Diversification Improve Welfare in Rural Areas? Evidence from the Rural Skills Development Project in Bhutan

Abstract

Income growth in rural areas is a considerable challenge to further poverty reduction and economic development. Using a survey of rural Bhutanese households, we investigate the impacts of a vocational skills training program that was intended to diversify incomes outside of agriculture. We find that the program had limited positive impacts along various economic and psychosocial dimensions, but that it diversified household incomes into these skill areas. Notably, the program did raise incomes for trainees in non-competitive labor markets where trainees accounted for only a small percentage of the overall population. The results and anecdotal evidence suggests that: (i) a greater emphasis on creating a mechanism to connect the training program to income generating opportunities via job placement services, entrepreneurship, or mentoring services is needed—especially in competitive labor markets where there are too many trainees in relation to the population; (ii) refining the curriculum and extending the training time to allow trainees to develop their skills may be important; (iii) encouraging greater equality in the skill development process may require providing more female-friendly training that has flexibility in training time and venues and focuses on other skill areas.