This note uses data from the Bhutan living standards survey (BLSS) for 2007, 2012, and 2017 to examine trends in poverty reduction and shared prosperity and to assess the drivers of poverty reduction in the last decade. The note documents the remarkable progress that Bhutan has made in reducing poverty, sharing prosperity, and improving other measures of well-being. To this end, it first establishes a poverty trend that is measured in a consistent manner over time. The resulting poverty trend deviates from official poverty rates for mainly two reasons: (a) the consumption aggregate is being measured in a consistent way over time, resulting in a different distribution of consumption in each survey year
and (b) the 3.20 dollars World Bank poverty line for lower middle-income countries is used as the cut-off to define poverty. Poverty reduction was helped by improved earnings in the commercial agriculture sector. Moreover, vulnerability has remained high, partly because farmers are exposed to various uninsured risks, including price shocks, but also because the social protection system is weak overall and nonfarm diversification is low. Going forward, it will be important to continue increasing agricultural productivity and creating productive jobs outside of the agriculture sector. Proper prioritization and sequencing of policies may also help in this regard.