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Labor Market Power, Self-Employment, and Development

Author

Listed:
  • Francesco Amodio

    (McGill University)

  • Pamela Medina

    (University of Toronto)

  • Monica Morlacco

    (University of Southern California)

Abstract

This paper shows that self-employment shapes labor market power in low-income countries, affecting industrial development. Using Peruvian data, we show that wage-setting power increases with concentration, but less so where self-employment is more prevalent. A general equilibrium model shows that while concentration increases oligopsony power, it also raises labor supply elasticity by pushing workers into self-employment, thereby mitigating labor market power. Conversely, pro-competitive policies that draw workers into salaried jobs may increase labor market power, with limited overall impact. We demonstrate that these policies are only effective if they tackle labor market power.

Suggested Citation

  • Francesco Amodio & Pamela Medina & Monica Morlacco, 2024. "Labor Market Power, Self-Employment, and Development," RF Berlin - CReAM Discussion Paper Series 2418, Rockwool Foundation Berlin (RF Berlin) - Centre for Research and Analysis of Migration (CReAM).
    • Handle: RePEc:crm:wpaper:2418
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    More about this item

    Keywords

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

    JEL classification:

    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O54 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean

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