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 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 (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: Labor Market Power and Self-Employment Around the World (2025)
Working Paper: Labor Market Power and Self-Employment Around the World (2024)
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