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Labor Market Power, Self-Employment, and Development

Author

Listed:
  • Francesco Amodio

    (McGill University)

  • Pamela Medina

    (University of Toronto)

  • Monica Morlacco

    (University of Southern California)

Abstract

This paper shows that self-employment shapes labor market power in low-income countries, affecting industrial development. Using Peruvian data, we show that wage-setting power increases with concentration, but less so where self-employment is more prevalent. A general equilibrium model shows that while concentration increases oligopsony power, it also raises labor supply elasticity by pushing workers into self-employment, thereby mitigating labor market power. Conversely, pro-competitive policies that draw workers into salaried jobs may increase labor market power, with limited overall impact. We demonstrate that these policies are only effective if they tackle labor market power.

Suggested Citation

  • Francesco Amodio & Pamela Medina & Monica Morlacco, 2024. "Labor Market Power, Self-Employment, and Development," RFBerlin Discussion Paper Series 2418, ROCKWOOL Foundation Berlin (RFBerlin).
    • Handle: RePEc:crm:wpaper:2418
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    Citations

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    Cited by:

    1. Abbate, Nicolás & Jiménez, Bruno, 2026. "Do minimum wage hikes lead to employment destruction? Evidence from a regression discontinuity design in Argentina," Journal of Development Economics, Elsevier, vol. 178(C).
    2. Camila Cisneros-Acevedo & Alessandro Ruggieri, 2022. "Firms, policies, informality, and the labour market," Discussion Papers 2022-11, University of Nottingham, GEP.
    3. Jiménez, Bruno, 2023. "The Political economy of the minimum wage," Labour Economics, Elsevier, vol. 85(C).
    4. Francesco Amodio & Emanuele Brancati & Nicolás de Roux & Michele Di Maio, 2025. "Labor Market Institutions and Wage-Setting Power: Evidence from Latin America and the Caribbean," Documentos CEDE 2025-26, Universidad de los Andes, Facultad de Economía, CEDE.
    5. Balmaceda, Felipe, 2025. "Occupational mismatch and market power," Journal of Development Economics, Elsevier, vol. 177(C).

    More about this item

    Keywords

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    JEL classification:

    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • 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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