Labor Market Power in Developing Countries: Evidence from Colombian Plants

Francesco Amodio and Nicolás de Roux

No 16180, CEPR Discussion Papers from Centre for Economic Policy Research

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 pre-determined 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.

Keywords: Labor market power; Export; Colombia (search for similar items in EconPapers)
JEL-codes: J42 L10 O14 O54 (search for similar items in EconPapers)
Date: 2021-05
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Working Paper: Labor Market Power in Developing Countries: Evidence from Colombian Plants (2021)
Working Paper: Labor Market Power in Developing Countries: Evidence from Colombian Plants (2021)
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