Labor Market Power and Self-Employment Around the World

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

No 18828, CEPR Discussion Papers from Centre for Economic Policy Research

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 the marginal revenue product of labor and the wage paid—vary widely across countries and show a robust hump-shaped association with the share of self-employed workers. We interpret this pattern through a simple oligopsonistic labor market model in which job-finding frictions determine the prevalence and composition of self-employment, the elasticity of labor supply to wage employment, and wage markdowns. The availability of unemployment benefits alters workers’ outside options and can reverse the equilibrium relationship between self-employment and labor market power. Consistent with the model, wage markdowns increase with self-employment in countries with unemployment protection, but decrease in those without it. The results show that job-finding frictions and unemployment protection are key to explaining cross-country differences in employer market power.

Keywords: labor; market; power (search for similar items in EconPapers)
JEL-codes: J20 J30 J42 L11 (search for similar items in EconPapers)
Date: 2024-02
References: Add references at CitEc
Citations:

Downloads: (external link)
https://cepr.org/publications/DP18828 (application/pdf)

Related works:
Working Paper: Labor Market Power and Self-Employment Around the World (2025)
Working Paper: Labor Market Power and Self-Employment Around the World (2024)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:18828

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP18828

Access Statistics for this paper

More papers in CEPR Discussion Papers from Centre for Economic Policy Research 33 Great Sutton Street, London EC1V 0DX, UK.
Bibliographic data for series maintained by CEPR ().