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it does look like one of those Black Forest lightwood carvings so is it possible that it depicts a German fairy tale or legend ?
Here is a possibility ...
The Rose-Elf by Hans Christian Anderson (Fairy Tales 1839)
A young woman’s lover is stabbed to death, beheaded, and buried, by her wicked and possessive brother. After committing the murder, the brother is described as ‘entering the beautiful, blooming girl’s bedroom as she lies dreaming of her lover, and bending over her, laughing hideously as only a fiend can laugh as he does so’. This could mean he just stands at the foot of her bed and laughs, but it could also represent something a lot more sinister.As the brother was burying the corpse, a dry leaf settled in his hair. A tiny elf, who witnessed the brutal act, hid under this leaf, which then settled on the girl’s bed as her brother ‘bent over her’. The elf climbs into the girl’s ear, tells her of her lover’s murder, and informs her where the body lies. The girl wakes up, broken-hearted, and goes into the woods to dig up her lover’s head. She shakes the earth out of his hair, kisses his cold, dead lips, and carries the severed head home with her.