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Labor Market Power and Development

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  • Armangué-Jubert, Tristany
  • Guner, Nezih
  • Ruggieri, Alessandro

Abstract

Imperfect competition in labor markets can lead to efficiency losses and lower aggregate output. This paper examines how variations in labor market competitiveness may account for differences in GDP per capita among countries. By structurally estimating an oligopsony model with free entry across different development stages, we find that labor market power increases with GDP per capita. Wage mark-downs vary from 54% in low-income countries to around 24% in the richest ones. If labor markets in poorer countries were as competitive as in more developed ones, their output per capita could rise by up to 45%

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  • Armangué-Jubert, Tristany & Guner, Nezih & Ruggieri, Alessandro, 2023. "Labor Market Power and Development," CEPR Discussion Papers 18536, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:18536
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    Keywords

    labor market power;

    JEL classification:

    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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