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Labor Market Power in Developing Countries: Evidence from Colombian Plants

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  • Francesco Amodio
  • Nicolás de Roux

Abstract

How much can employers in low and middle-income countries suppress wages below marginal productivity? Using plant and customs data from Colombia, we exploit predetermined variation across plants in sales export destination combined with variation in exchange rates to generate plant-specific shocks to marginal revenue productivity and labor demand. We estimate a firm-level labor supply elasticity of around 2.5, implying that workers produce about 40% more than their wage level. Our results indicate that Colombian and US manufacturers have a comparable degree of labor market power

Suggested Citation

  • Francesco Amodio & Nicolás de Roux, 2021. "Labor Market Power in Developing Countries: Evidence from Colombian Plants," Documentos CEDE 19267, Universidad de los Andes, Facultad de Economía, CEDE.
  • Handle: RePEc:col:000089:019267
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    Cited by:

    1. Nicolás Abbate & Bruno Jiménez, 2023. "Do Minimum Wage Hikes Lead to Employment Destruction? Evidence from a Regression Discontinuity Design in Argentina," CEDLAS, Working Papers 0310, CEDLAS, Universidad Nacional de La Plata.
    2. Laura Boudreau & Julia Cajal-Grossi & Rocco Macchiavello, 2023. "Global Value Chains in Developing Countries: A Relational Perspective from Coffee and Garments," Journal of Economic Perspectives, American Economic Association, vol. 37(3), pages 59-86, Summer.
    3. Yasin Kür¸sat Önder & Mauricio Villamizar-Villegas & Jose Villegas, 2023. "Debt Moratorium: Theory and Evidence," Borradores de Economia 1253, Banco de la Republica de Colombia.
    4. Chau, Nancy H. & Kanbur, Ravi & Soundararajan, Vidhya, 2022. "Employer Power and Employment in Developing Countries," IZA Discussion Papers 15514, Institute of Labor Economics (IZA).
    5. Andrés Álvarez & Juan Camilo Chaparro & Carolina González & Santiago Levy & Darío Maldonado & Marcela Meléndez & Natalia Ramírez & Marta Juanita Villaveces, 2022. "Reporte ejecutivo de la Misión de Empleo de Colombia," Documentos de trabajo 20156, Escuela de Gobierno - Universidad de los Andes.
    6. Amodio, Francesco & Medina, Pamela & Morlacco, Monica, 2022. "Labor Market Power, Self-Employment, and Development," IZA Discussion Papers 15477, Institute of Labor Economics (IZA).
    7. Pham, Hoang, 2023. "Trade reform, oligopsony, and labor market distortion: Theory and evidence," Journal of International Economics, Elsevier, vol. 144(C).

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    More about this item

    Keywords

    labor market power; export; Colombia.;
    All these keywords.

    JEL classification:

    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O54 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean

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