Labor Market Power and Self-Employment Around the World

Francesco Amodio, Emanuele Brancati, Peter Brummund, Nicolás de Roux and Michele Di Maio

No 21072, Documentos CEDE from Universidad de los Andes, Facultad de Economía, CEDE

Abstract: We estimate the labor market power of manufacturing firms in 82 low- and middle-income countries using over 13,000 observations from a harmonized global dataset. Wage markdowns— the gap between a worker’s marginal revenue product and their wage—vary widely across countries and show a robust hump-shaped association with the share of self-employed workers. We interpret this pattern using a simple oligopsonistic labor market model with frictions, in which self-employment and wage markdowns are jointly determined, and unemployment protection dictates whether their relationship is positive or negative. Consistent with the model, wage markdowns rise with self-employment in countries with such protection, but fall in those without it. These findings underscore how labor market frictions and regulations shape the link between self-employment and labor market power across countries.

Keywords: labor market power; self-employment; development; labor market institutions. (search for similar items in EconPapers)
JEL-codes: J20 J30 J42 L11 (search for similar items in EconPapers)
Pages: 59 pages
Date: 2024-03-11
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Persistent link: https://EconPapers.repec.org/RePEc:col:000089:021072

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