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Measuring Labor Market Power in Developing Countries: Evidence from Colombian Plants

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  • Francesco Amodio
  • Nicolás de Roux

Abstract

How much can employers in low- and middle-income countries suppress wages below marginal productivity? Using plant and customs data from Colombia, we exploit predetermined variation across plants in sales export destinations combined with variation in exchange rates to generate plant-specific shocks to marginal revenue productivity and labor demand. We estimate a firm-level labor supply elasticity of around 2.5, implying that workers produce about 40% more than their wage level. This result is driven by plants that account for a large share of local employment, consistent with an oligopsonistic labor market model.

Suggested Citation

  • Francesco Amodio & Nicolás de Roux, 2024. "Measuring Labor Market Power in Developing Countries: Evidence from Colombian Plants," Journal of Labor Economics, University of Chicago Press, vol. 42(4), pages 949-977.
    • Handle: RePEc:ucp:jlabec:doi:10.1086/725248
    DOI: 10.1086/725248
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    Cited by:

    1. Martins, Pedro S. & Dai, Li & Duan, Wenjing, 2024. "Local labour concentration moderates the disemployment effects of minimum wages in China," GLO Discussion Paper Series 1504, Global Labor Organization (GLO).

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