Estimation of the Contribution of Child Labour to the Formation of Rural Incomes: An Application to Nepal

This paper estimates the contribution of child labour to the formation of household income in rural enterprises. The contribution to household income from the employment of children comes either from the employment on-farm at a shadow wage or off-farm in the agricultural or other sectors. The paper uses a cost function with household labour as a quasi-fixed factor in order to estimate the shadow wage for each component of the household labour force. The study also provides an estimate of contribution of child labour to household income in the rural sector, both at the household and national level. A set of simulation also highlight the role that child labour plays in insuring household subsistence and how it does affects income distribution.