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The Shadow Wage of Child Labor: An application to Nepal

Author

Listed:
  • Elisa Meneghello

    (University of Verona)

  • Martina Menon

    (Department of Economics, University of Verona)

  • Federico Perali

    (Department of Economics, University of Verona)

  • Furio Rosati

    (University of Rome Tor Vergata)

Abstract

This paper describes a new method to estimate shadow wages and to identify the shadow contribution of child labor. Our approach allows to perform a direct test for recursivity by comparing the estimated shadow wages with the market wage. This is a novel option to test for non-separability that adds to the traditional indirect tests based on restriction on production decisions or on consumption choices. Our innovative identification strategy is not specific to child labor but can also be used to identify the gender specific shadow wage of women and men. The estimated shadow wages, in the context of the Nepalese rural economy, are meaningful. Based on the evidence of our direct test for separability, we conclude that the separable representation of the farm households is not consistent with the Nepalese data. We further provide an estimate of the contribution of child labor to household income both at the household and national level. A set of simulations highlights the role that child labor plays in insuring household subsistence and how it affects Nepalese income distribution

Suggested Citation

  • Elisa Meneghello & Martina Menon & Federico Perali & Furio Rosati, 2022. "The Shadow Wage of Child Labor: An application to Nepal," Working Papers 8, SITES.
    • Handle: RePEc:awm:wpaper:8
    Note: SITES Working Papers 8
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    More about this item

    Keywords

    Shadow wage; child labor; effective labor; farm-household; separability; Nepal;
    All these keywords.

    JEL classification:

    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • D13 - Microeconomics - - Household Behavior - - - Household Production and Intrahouse Allocation
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory

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