Can Skill Diversification Improve Welfare in Rural Areas? Evidence from Bhutan

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 programme that was intended to diversify incomes outside agriculture. We find that the programme had limited positive impacts along various economic and psychosocial dimensions, but that it diversified household incomes into the basic construction skill areas that it provided. Notably, the programme did raise incomes for trainees in non-competitive labour markets where trainees accounted for only a small percentage of the overall population. The results and findings from qualitative assessments suggest that: a greater emphasis on creating a mechanism to connect the training programme with income-generating opportunities via job placement services, entrepreneurship or mentoring services is needed – especially in competitive labour markets where there are too many trainees in relation to the population; refining the curriculum and extending the training time to allow trainees to develop their skills may be important; and 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.