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Labor Market Power and Self-Employment Around the World

Author

Listed:
  • Francesco Amodio
  • Emanuele Brancati
  • Peter Brummund
  • Nicolás de Roux
  • Michele Di Maio

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.

Suggested Citation

  • Francesco Amodio & Emanuele Brancati & Peter Brummund & Nicolás de Roux & Michele Di Maio, 2025. "Labor Market Power and Self-Employment Around the World," RFBerlin Discussion Paper Series 2566, Rockwool Foundation Berlin (RF Berlin).
    • Handle: RePEc:crm:wpaper:2566
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    Keywords

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    JEL classification:

    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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