In developing countries, where most of the families work on their own farms, wage or labor-related income cannot be observed directly. This paper contributes to the literature on gender wage difference in labor and development economics by developing a new approach to estimate the shadow wage of agricultural households in Nepal. Using a general functional form, we first derive the shadow wage from a theoretical model. Then, ward-level fixed effect is used to estimate the shadow wage by gender for Nepalese agricultural households. We find that productivity of women is higher at the mean, median and 75th quantile than that of men. Despite their higher productivity, females are underpaid at the mean and median in the labor market compared to their marginal productivity, calling for greater investments to involve female in the production process.


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