Labor Market Power, Self-Employment, and Development

Francesco Amodio, Pamela Medina and Monica Morlacco

No 17543, CEPR Discussion Papers from C.E.P.R. Discussion Papers

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.

Keywords: Development; Monopsony; Sorting; Self-employment (search for similar items in EconPapers)
JEL-codes: J2 J3 J42 L10 O14 O54 (search for similar items in EconPapers)
Date: 2022-09
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Related works:
Working Paper: Labor Market Power, Self-Employment, and Development (2024)
Working Paper: Labor Market Power, Self-Employment, and Development (2022)
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