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The Shadow Wage of Child Labor: An application to Nepal

Elisa Meneghello, Martina Menon (), Federico Perali () and Furio Rosati ()
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Elisa Meneghello: University of Verona
Martina Menon: Department of Economics, University of Verona
Federico Perali: Department of Economics, University of Verona

No 8, Working Papers from SITES


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

Keywords: Shadow wage; child labor; effective labor; farm-household; separability; Nepal (search for similar items in EconPapers)
JEL-codes: D11 D13 J31 O12 Q12 (search for similar items in EconPapers)
Date: 2022-05
Note: SITES Working Papers 8
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