Global Labor Market Power

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

No 18828, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We estimate labor market power using over 13,000 observations of manufacturing firms across 82 low and middle-income countries around the world. Within local labor markets, larger and more productive firms have higher wage markdowns and pay lower wages. Labor market power across countries exhibits a mild non-linear relationship with GDP per capita, entirely driven by a strong hump-shaped relationship with the share of self-employed workers. Labor market institutions fully account for the hump shape: in countries with unemployment protection, wage markdowns increase with the share of self-employment while the opposite is true in countries without it. We explain this finding through the lens of a simple oligopsonistic labor market model with frictions. Self-employment prevalence correlates with the elasticity of labor supply to the wage paid, and labor market institutions can change the sign of this relationship.

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)
Date: 2024-02
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Related works:
Working Paper: Global Labor Market Power (2024)
Working Paper: Global Labor Market Power (2024)
Working Paper: Global Labor Market Power (2024)
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