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Global Labor Market Power

Author

Listed:
  • Francesco Amodio

    (McGill University)

  • Emanuele Brancati

    (Sapienza University)

  • Peter Brummond

    (University of Alabama)

  • Nicolas de Roux

    (Universidad de Los Andes, Colombia)

  • Michele Di Maio

    (Sapienza University)

Abstract

We estimate the labor market power of over 13,000 manufacturing establishments across 82 low and middle-income countries around the world. Within local labor markets, larger and more productive firms have higher wage markdowns and pay lower wages. Labor market power across countries exhibits a mild non-linear relationship with GDP per capita, entirely driven by a strong hump-shaped relationship with the share of self-employed workers. Labor market institutions fully account for the hump shape: in countries with unemployment protection, wage markdowns increase with the share of self-employment while the opposite is true in countries without it. We explain this finding through the lens of a simple oligopsonistic labor market model with frictions. Self-employment prevalence correlates with the elasticity of labor supply to the wage paid, and labor market institutions can change the sign of this relationship.

Suggested Citation

  • Francesco Amodio & Emanuele Brancati & Peter Brummond & Nicolas de Roux & Michele Di Maio, 2024. "Global Labor Market Power," RF Berlin - CReAM Discussion Paper Series 2404, Rockwool Foundation Berlin (RF Berlin) - Centre for Research and Analysis of Migration (CReAM).
    • Handle: RePEc:crm:wpaper:2404
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    References listed on IDEAS

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    More about this item

    Keywords

    labor market power; self-employment; development; labor market institutions;
    All these keywords.

    JEL classification:

    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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